Question: At our settlement recently, the settlement attorney charged us $225 for a survey. When we questioned this charge, we were told it was a lender's requirement and we could do nothing about it. Just what is a survey?
Answer: I hope the lawyer at least gave you a copy of the survey and fully explained it to you.
It is important to distinguish between a survey and an appraisal -- both of which are generally charged to the buyer. An appraisal assists the mortgage lender in assessing the value of the house so as to determine whether a mortgage should be made and in what amount. Generally, the appraisal will analyze the condition of the house, its location, structural soundness and comparable sales in the area.
A survey, on the other hand, goes to the question of the marketability of the house. The surveyor determines whether the house is within the property borders, whether there are any encroachments on the property by neighbors and the extent to which any easements on the property may affect legal title.
Up until the mid 1980's, mortgage lenders did not require a survey. But this has changed. Title companies, when issuing a title insurance policy, will issue an exception to title unless a survey has been obtained. Since Lenders insist on obtaining a clear "lender's" title insurance policy covering the face value of the mortgage, it becomes necessary to obtain a survey to satisfy the lender's requirements.
My own belief is that everyone buying a house should obtain a survey whether or not the lender requires it. Even if you pay all cash for your new house, you should insist on obtaining a survey when you go to closing. It is a good idea to learn, for example, where your property lines are, and whether there are any building restrictions affecting your right to add a porch or a fence.
Here are some suggestions involving the survey process:
First, survey prices vary considerably. I've seen them as low as $150 and as high as $300, for the same single-family house. Ask your settlement attorney for an estimate. If it seems too high, arrange for your own survey and make sure a copy of the survey gets to your lender well in advance of settlement. It must be done by a qualified surveyor, licensed in the state where your property is located.
Next, ask your sellers who did their survey. Unfortunately, most lenders will not honor a survey if it is more than six months old. But inquire from the prior surveyor whether the old survey can be updated and whether this will save you some money. Some of the more reputable surveyors are happy to get your business and will give you a break in the price.
Additionally, if you are refinancing your existing home, most lenders and title insurance companies are willing to accept a survey affidavit instead of a new survey. You will have to sign an affidavit that no improvements have been made to the property since you originally purchased it. These affidavits are available at a minimum cost.
You should also go to the government surveyors in the land records office where your property is located. They are quite helpful and may be able to assist you with boundary questions, easement issues and such.
If you are buying a condominium unit, you will not have to obtain -- or pay for -- a separate survey of your unit. That survey has already been done as part of the plans which were recorded with the condominium documents.
It should be noted that the typical survey which most purchasers obtain when they go to closing is called a "house location" survey. Title insurance generally will exclude from coverage "encroachments, overlaps, boundary line disputes and any other matters which would be disclosed by an accurate survey and inspection of the premises."
The title insurance industry takes the position that a "house location" survey is not such an "accurate survey," and thus will reject many claims regarding boundary disputes.
To obtain full title insurance coverage, the purchaser should obtain what is known as an ALTA (American Land Title Association) Survey. This is a very detailed, comprehensive survey, which will cost considerably more than the house location survey.
To be absolutely sure of what property you are purchasing, you might want to consider obtaining this ALTA Survey. However, most residential purchasers would rather not spend that additional money, and will take a chance that the house location survey will adequately protect them.
Finally, keep in mind that most surveys will not include staking your property corners. If you want stakes posted, it will cost you additional dollars. You should make the necessary arrangements for stakes at the time you order the survey.
When you go to settlement, you should ask the settlement attorney to review the survey with you, and to discuss any potential issues which that survey may raise. Are the fences encroaching on your neighbor's property? Is the driveway owned by you -- or it is a shared driveway? Who owns any trees which are on the property? Once you purchase the property, it may be too late to raise any boundary-related issues.
And don't forget to get a copy of the survey from your closing attorney before you leave the settlement table.