Once a common practice at closings, buyers today rarely obtain a survey of the property they are purchasing. Before, if a buyer needed a loan to purchase property, their lender required that a new survey is obtained in order to proceed with the closing. However, some time ago, title insurance companies created a lenders title insurance policy that protected the lender against any claims that may result from any boundary line dispute or other matter that would be disclosed by a current survey. Since their collateral was already protected by this insurance policy, lenders no longer required buyers to obtain a survey.
Thereafter, title insurance companies created a new owners title insurance policy that offered “some” protection to the buyer for claims that may result from a boundary line dispute or other matter that might be disclosed by a current survey. This new policy is commonly known as an “enhanced policy” and costs a little more than a “standard” owner’s policy. Most law firms now issue this “enhanced policy” at closing to buyers. With lenders no longer requiring a survey and with the creation of the new owner’s policy, most buyers have decided they no longer need a survey of their new property.
I recommend that buyers spend the additional monies at closing to purchase the “enhanced policy”. The small increase in price is well worth the additional risks covered by the “enhanced policy”, which includes, but is not just limited to, survey issues. However, I still strongly recommend that buyers also obtain a survey of their property prior to closing.
Although the “enhanced policy” provides some protection for boundary line disputes, the amount of protection is limited by the policy. Additionally, the buyer must first satisfy certain deductibles before any contribution by the insurer. Moreover, there are several types of claims that are not protected by the “enhanced policy” that could have a significant impact on the buyer.
In one of my closings, the buyers purchased a new home from a builder who walked the property lines with the buyers prior to closing showing them the huge backyard that was perfect for the buyers’ two large dogs. After the closing, the buyers began building a fence in the backyard when the neighbor informed them that the fence was being erected on the neighbor’s property. A survey then disclosed that the buyers’ lot extended only a mere TWO FEET from their back door. In other words, they had NO backyard. The buyers were not covered by any type of title insurance for this issue and were forced to sell the house immediately.
In another transaction at my office, the buyers were attracted to a home mainly because of a huge fenced playground that the sellers had built in their backyard. Luckily, the buyers obtained a survey prior to closing and learned that the playground was built on land owned by the Department of Transportation. Once discovered, the DOT would certainly require the immediate removal of the playground. Because the main attraction to the house was the backyard and playground, these buyers walked away from the deal prior to closing and chose to purchase another house that better suited their needs.
A survey accurately discloses to a new buyer the exact location of property lines, drainage easements, utility easements, building setback lines, fences, structures, driveways, landscaping and walls. The survey would disclose if any of these structures, fences, driveways, walls, etc. encroached on any adjacent property and/or violated any setback lines or easements. A buyer can avoid most, if not all, potential issues that may occur with these types of claims by simply ordering a survey prior to closing. Most surveys cost between $300 and $500 and can be completed in about a week. I would not buy any property without first obtaining a survey.
Brent Warren is a partner in the law firm of McLain & Merritt, P.C., a mid-size firm that has been in business over fifty years. He has been practicing law since 1992 and specializes in both residential and commercial real estate. Brent is a graduate of Vanderbilt University School of Law and the University of Kentucky (B.S. Accounting). His clients include real estate agents, loan officers, builders, developers and relocation companies. He lives and works in Alpharetta, Georgia. firstname.lastname@example.org