Where ARE The Property Boundaries?
You love the building lot, but can't quite determine where the property boundaries lie. Is the neighbor's fence in the correct place? And what about the location of his shed?
It's amazing how many innocent-looking situations can turn into nightmares when buyers don't take the proper precautions to check (and double-check) property boundaries.
So let's cover what to look out for, steps that can be taken to protect yourself in a purchase agreement, and possible remedies for solving property boundary problems.
Many encroachments of neighboring fences, sheds, and other buildings can be seen with the naked eye. For example, one of the first things a real estate agent does when listing a property for sale is to visually inspect the property boundaries. If the agent notes any discrepancies or potential abnormalities, he might reference a plat map and the legal description, measure the property boundaries, and suggest that the seller contact a survey professional. But sometimes encumbrances are more subtle---especially when involving bare ground without improvements. Surveys are often required to right wrongs or further clarify boundaries that have been changed by adding fences, landscaping---or actions caused by Mother Nature.
Why would a survey be necessary? Let's say that a property boundary along a fence line was in question. Until the seller knows definitely where the property boundary lies, the real estate agent cannot:
Know the true value of the property and/or whether or not it can be sold without potential title insurance problems;
Represent the proper boundaries to a potential buyer
Know if potential challenges to the title could come from the owner of the encroaching fence.
So if you were to purchase this property without taking the proper precautions, you could be buying all of the seller's headaches--perhaps at a premium price.
How can you best protect yourself in a purchase contract if you sense property boundaries need to be clarified? Your first step is to gather all the information you can about the problem. Was it created by someone maliciously trying to encroach on the property, or did it happen innocently? Is the seller aware of the problem? And if the seller agrees to provide a survey, will he/she then be willing to do whatever is necessary to “right the wrongs” found? (This is often the most time-consuming piece of untangling the problem since it requires both the seller and the other party involved---the encroacher---to work together, hopefully in a timely fashion.)
Second, make sure you write the purchase agreement contingent upon receiving satisfactory, acceptable, and verifiable information about the property boundaries. This could include a survey and/or a title company interpretation---and then have that documentation reviewed by your own professional surveyor or real estate attorney before removing the contingency. If you're going to be the person the problem shifts to if it's not remedied, make sure you're happy with the findings before you part with your leverage.
What if a property boundary problem is found that can't be remedied? Although this is fairly rare, you still might choose to purchase the property. Because of the problem, the property value could have decreased and/or the seller might need to make some other concession to even out the risk.
One last concern. Be sure to talk with a title company about the availability of title insurance, especially if you're planning on constructing a home on the lot. An encroachment problem hanging fire might render title insurance unavailable or available only at a premium price. It could also have a bearing on your ability to obtain a mortgage loan.