Recently we have seen buyers opting out of the expense of a survey prior to closing on a bank owned foreclosure. While a survey may seem like a necessity in rural areas, even in suburban areas it is a good idea. Some kind of survey (staked or at minimum an improvement location report) will help identify potential issues. Always remember that you are likely waiving a number of your remedies for solving survey issues when you sign the bank documents.
Why You Want A Survey
Title companies will argue that they only insure the property that was foreclosed on when no survey is obtained. At minimum a boundary dispute will cost you many hours of frustration. It might actually cost you much more if you find the boundary lines of the property you have acquired run through your three car garage!
In discussing this particular issue with a title company last week I was told this is the single biggest issue they are finding with cash buyers of foreclosed homes (if you are getting a mortgage-no worries. The lender won’t extend your loan without a survey!). In order to save a little money cash buyers are waiving their right to a survey. Later they discover they did not actually buy as much land as was advertised. Or the barn in the back does not really belong to them.
Foreclosed homes come with no representations or warranties. Tax records are the basis for the representations made in a listing. It is there is to work with when the seller is an institution. Tax records often just describe a parcel in terms of acreage. Not boundaries. And believe it or not, improvements get built without permits and anybody paying attention to boundary lines.
What Can Go Wrong When Boundaries Are Not Enforced?
For example, a builder created an agreement with neighbors to allow for him to cross their properties to access the city water and septic. This was important because the property he was building on was too small for permits to be issued to dig a well or have a septic system. Unfortunately, the builder went bankrupt and lost the property to foreclosure. The neighbors contended the agreement no longer applied as it was with the builder and not the bank. A survey might have helped to discover this issue. Fortunately, we were made aware of the issue and combined an agreement with the neighbors so the property could be sold with access.
Don’t be penny wise and pound foolish. Discover all you can prior to closing by having a complete survey of the parcel you are acquiring. For good measure make sure the title company is presented with the results.
