Imagine sinking your life savings into a parcel of land to build your retirement home, however, instead of closing on your newly constructed home, you’re refinancing your primary residence to recoup all the money you just lost! This isn’t a hypothetical, this actually happened.
Most home buyers are willing to spend money to inspect the inside of the home as well as items such as Well and Septic. Unfortunately, not as many are willing to inspect the outside of a home, by obtaining a survey of the property. A survey will determine boundary lines and things such as legal access, easements and encroachments.
The above couple took their life savings to pay cash for a 1-acre parcel of land with the intent to build their retirement home. The couple did not hire a Realtor®, instead, choosing to work directly with the seller. Without a professional to guide them through the transaction, they chose to waive a survey of the property, in turn, blindly purchasing the land based on little more than a promise by the seller that they owned and could convey the property in which they contracted to.
In any transaction involving real property, it is imperative to determine that you have legal right of access to the property. Legal access can come in many ways, such as your property abutting a public street or a neighboring parcel granting an easement, in turn, providing a right or use of their land for a specified purpose. In this case, the specified purpose would be to cross over the adjoining land to gain access to your own.
Once legal access is determined, we will look to see if the property has any easements affecting it. An easement grants rights allowing others use of our property for a specified purpose, such as crossing over to gain access to a neighboring parcel. We will also look for encroachments, where an owner of property has violated rights of their neighbor’s property by building something on it, such as a fence or other improvements.
There are many common easements that allow others a right to access real property. Common easements would be for things such as utilities (electric, gas, sewer) or to manage drainage and/or storm water. It is not unusual to find Ingress/Egress easements running across a property, which allows someone to travel over the subject property to gain access to another. Generally, an Ingress/Egress easement will be granted over a specified part of the property and may also contain language regarding maintenance and upkeep of the easement. It is vitally important to understand who has a legal right for use or access to your property to determine whether it will affect your intended use and/or enjoyment of the property.
Encroachments from a neighbor’s lot onto our own, or vice versa, can also be a cause of concern. Many times, we will see items such as fences or driveways encroach onto an adjoining property. Occasionally, sheds or buildings or even homes will be built where they encroach onto an adjoining property. Remedies for encroachments can be as simple as moving an improvement onto the correct property or as complicated as going to court to determine ownership of the improvement or even the land. It is important to know if any encroachments are affecting your property or your neighbor’s property prior to closing. This will allow you the ability to ask the seller to remedy any issues before taking ownership of the property.
Unfortunately, for our retiring couple, legal access did not exist. When they went to build their home, it was realized that their 1-acre lot was actually 1/10 of an acre and it was land locked. They did not have a legal right to access their own property.
The couple sued and won their lawsuit against the seller of the lot. Unfortunately, the seller went bankrupt and then the company dissolved. They did not receive one penny from the sellers and spent thousands more of their own money in filing the lawsuit.
They next filed a claim against their title insurance policy, however, it was denied as Owner’s Title Insurance takes exception to any matters that an accurate survey of the property would uncover. Their lawsuit against the title insurance underwriter was thrown out of court because they had not obtained a survey of the property.
They found their way to my closing table as a result of the above and were completing a cash out refinance of their primary residence to recoup the tens of thousands of dollars they had lost.
The couple knew and admitted that if they had spent the $300 on a property survey it would have uncovered the discrepancy in the size of the parcel as well as the lack of legal access, in turn, preventing their nightmare.
As a home buyer or seller, it’s important to hire a professional, such as a Realtor®, to help guide you through this complicated process. When buying, please remember it’s equally as important to inspect the outside of the home, by obtaining a survey, as it is the inside of the home. In the long run, the extra money spent will be well worth it!
One thing I always say to Realtors® in the classes I teach is that in real estate, it’s never a problem until it’s a problem, and then it’s a big problem!
Phillip Blake has been in the title insurance industry for 16 years, the past 10 as Manager of MBH Settlement Group in Fredericksburg. Phillip is also a Director for the Fredericksburg Area Association of Realtors and for the past 5 years has served as President of the Spotsylvania County Little League. When not working, he enjoys spending time with his wife of almost 15 years, Sandra, their two boys ages 12 and 10 and new puppy ESPN (pronounced espen).