Debunking Old Myths, Installment 1: Yes, You Need A Survey With A Cash Closing

Somewhere along the line it entered the Realtor lexicon the phrase “you’re paying cash, you don’t need a survey.”

It is as if the method of payment for the property magically changes the fact that…for example…a six-foot corner of the living room encroaches into the platted side yard setback…

It is common knowledge that mortgage lenders require a survey in connection with their loan.  However, there are those Realtors and buyers who believe that on this particular subject the inverse is true when it comes to paying all cash, and the survey requirement is merely the contrivance of mortgage lenders to make buyers’ lives more difficult and expensive.

So just what exactly is a survey, and why do you need one?

The survey is “the process by which corners, boundaries, divisions, and other attributes of land are ascertained and measured.”  A surveyor is the expert who renders his or her opinion as to the location of “property and its improvements and appurtenances.”  The physical rendering of the surveyor’s work is the map of survey.

The map shows a buyer precisely what they’re purchasing in terms of the boundaries of the land, the location of improvements on and about the land, and the rights of others (if any) to use portions of the land.  How one finances the purchase of a property has no impact on the physical reality of the property, its boundaries, improvements, and any third party rights relating thereto.   

Put another way, to decline to obtain a survey is to forgo an understanding about the location of a property’s boundaries and improvements, the nature and extent of any third party rights and uses, and whether there are any collateral issues regarding these or any other matters that would impact the ownership and enjoyment of the property.

It is also important to note that unless the closing/title agent is provided with an accurate survey in advance of closing, the buyer’s title insurance policy will contain an exception to coverage for “[a]ny encroachment, encumbrance, violation, variation, or adverse circumstance affecting the [t]itle that would be disclosed by an accurate and complete land survey.“  Provision of the survey allows the title agent to insure the buyer’s property free and clear of such matters (except any adverse matters indicated on the survey map).

Practically speaking, the most typical survey-related concerns involve easements and encroachments.   

An easement “is a right given to another person or entity to use [a person’s] property.”  For instance, most modern subdivision lots have easements around the perimeter of each lot that allow utility providers access for placement and maintenance of lines and conduits, or allowing the homeowners association or others access to and from the property for maintenance and other matters.  In other cases an easement may exist to provide access to a land-locked parcel by granting ingress and egress over the subject property.

Regardless of the nature of the easement (whether specific or general), it can limit one’s ability to do what they please with their property, so it is important to know where the easement(s) is/are located, and the nature/extent of the easement(s) prior to taking title to the property.

An encroachment occurs when physical improvements (i.e., the home, patio, garage, fence, etc.) are built beyond setback or easement lines within the property, or beyond the boundary line of the property (or likewise when an adjoining property’s improvements are built into the subject property’s boundary).

Some encroachments can be resolved prior to the time of closing, i.e., through physical removal, or through the negotiation of the appropriate agreement, etc.  In some specific cases an endorsement can be added to the final title insurance policy to provide the buyer with protection in the event of a later challenge to an encroachment that is not (or cannot be) removed prior to closing.  Some encroachments are of enough concern that the client may not end up purchasing the property at all.

Of course, the buyer would never have any of these options if a survey revealing the issue was not procured in the first place.

From the selling agent’s perspective, keep in mind that the FAR-BAR contracts specify the time period for acquisition of the survey (Section 9d), and the mechanism for identifying issues of concern and extending the closing date as necessary based on the survey results (Section 18B).  As with the rest of the contract form, it is important to be familiar with these provisions so you are not caught unaware when a survey-related issue comes to light.

From the listing agent’s perspective, always make it a point to ask sellers for a copy of the latest and most accurate survey of the property that they have available, and share this early on with the selling agent, or even attach to the MLS file so the information is readily available to potential buyers and their closing agent.  Also be prepared to discuss and have your sellers disclose any known survey-related issues so they can be addressed as soon as possible and hopefully not delay or hinder the closing.

As always, I encourage you to seek the advice and guidance of an experienced real estate attorney when it comes to understanding and interpreting surveys and their contents, and when having to protect clients’ rights in the event of survey-related issues or concerns.  It goes without saying that we would be delighted to provide such assistance when the time comes.

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This information in this site is not intended to establish an attorney-client relationship, and if anything herein could be construed as legal guidance or advice, I strongly encourage you to consult with your own attorney before relying upon any such information.

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