The Property Survey: How it Benefits the Buyer and the Lender

Homebuyers are often overwhelmed by the long list of services that accompany a real estate purchase. Title reports, appraisals, home inspections, flood determination, credit reports, tax determination and surveys are all necessary to reassure everyone involved in the transaction that the property is marketable, insurable and deemed a worthy investment by the consumer as well as their lender.

The necessity of a survey is sometimes the most difficult to comprehend, especially in a city where houses have stood for nearly a century, or where a new development was recently approved by the local zoning officials.

But a survey can provide valuable information to the homebuyer as well as the lender who is providing the funds to finance the purchase.

What is a survey?

A survey details the boundaries of a parcel of land, often using systems such as “metes and bounds,” which describes a property using physical features of the land, such as a creek or neighboring properties, and defines the directions and distances of the parcel. Often times, permanent “markers” are embedded in the land to mark the boundaries, if there are no physical features to use to describe the boundaries. A surveyor will make sure the current legal description matches the true dimensions and measurements between the markers. A survey also identifies the location of the buildings on the property, such as the house, a garage or other improvements, as well as utility lines, easements, zoning setbacks or rights of way. 

Why are surveys required?

When a lender is in the process of approving a mortgage for a prospective homebuyer, it will often require a survey for two reasons. The first is to ensure the property being purchased and on which the lender’s mortgage will be placed matches the legal description of the property. The lender wants to know the property it is lending against is correctly identified in the event the lender may someday have to foreclose its mortgage. The legal description is included as part of the public record that is filed and preserved in the recorder’s office for each property in a county or borough. 

Second, title insurers will issue an “exception” on the lender’s title policy if an updated survey is not provided at the time of purchase. The lender wants to avoid this kind of “exception” to make sure it has the broadest
title insurance coverage possible to protect its investment. It also wants to know there are no issues in the survey that could cause marketability problems down the road.

How does this help the homebuyer?

As a homebuyer is contemplating a real estate purchase, he or she wants to be assured the neighbor hasn’t built a shed across the property line, or widened a driveway that encroaches onto the property. In other words, a homebuyer wants to know they are getting what they are paying for. 

Valerie Jahn-Grandin, Doma Chief Underwriting Counsel, noted she never closes without a survey.

“In my own personal dealings, I would never purchase real estate without a current survey,” she said. “Sometimes even the seller is not sure where his property starts and stops. With an investment of this size, why take the chance?”

On the other hand, a homebuyer also needs to know the exact property boundaries, to avoid such things as building a fence two feet onto the neighbor’s yard, or cutting down a tree that actually belongs to the adjoining property. It is especially critical if the homebuyer is planning improvements, such as a larger garage or a new swimming pool that may infringe on an easement or violate a zoning code because it is too close to the property line.

Are there different kinds of surveys?

There are different survey products, and as a real estate agent working with a buyer, it is important to understand that some survey types may limit the title insurance coverage your buyer receives after closing. Helping your buyers select the proper survey type for their particular situation will go a long way in building customer relationships that foster return and referral business.

Location Survey (Drawing)

A location survey or drawing is the least expensive of all survey types, but also provides the least amount of information. This survey certifies that the structure being purchased is located somewhere within the outline of the parcel of land and may detail position of buildings or other visible improvements on the land. A location drawing often carries a disclaimer, such as: “Not to be relied upon to establish boundaries.”

A location drawing does not certify property lines. It is important for a buyer who plans to remodel to have a more thorough boundary survey completed. Also, the location drawing is not sufficient to remove the survey exception from the owner’s title insurance policy, which means the purchaser may not have coverage against existing encroachments.

Boundary Survey

A boundary survey can cost between $800 and $2,500. It requires the surveyor to walk around the property and take measurements and field notes. The surveyor will then review available documents in the public records concerning the property and draw an exact scale depiction of the property showing the exact location and length of boundaries, easements, improvements and rights of access via a public right of way. A full boundary survey ensures your buyer’s title insurance policy will cover potential boundary disputes.

ALTA/ACSM Land Title Survey

An ALTA/ACSM Land Title Survey is guaranteed to meet survey requirements as detailed by the American Land Title Association, National Society of Professional Surveyors and the American Congress on Surveying and Mapping. 

“These professional associations are constantly adapting their standards to address changes in the title and settlement industry. The ALTA/ASCM survey is the top-of-the-line product,” advised Grandin. 

These industry professional groups specify the data to be shown on the survey, including boundary lines, locations of buildings and improvements, and the identification of easements (access rights by service companies such as water, gas, telephone, railways and other utilities). ALTA/ACSM surveys are very complex, costly and time-consuming to complete. For this reason, most ALTA/ACSM surveys are performed on commercial properties, rather than residential, where the purchase price merits the additional expense, and where the legal description and title issues are far more complex.