Tuesday, May 31, 2011

The Value of a Lot's Boundary History

Imagine that you're considering buying 2 different vacant lots. Both appear the same in every way. They are both fronting the same street, a thousand feet apart from each other. Both have similar terrain, soil, and vegetation. Both have a neighbor on each side. Both are zoned the same way and in the same City. The tax map shows them both to be 100 feet wide and 200 feet deep and a little under half an acre, and neither one contains any easements according to the title report. They are the same, right? And the appraisals come in about the same as well. If they have everything that you need, you could flip a coin and either one would be a winner. You pick one and the deal is done.

The 'Bad' Lot

You plan to develop the property, so you hire a surveyor and say that you need a 'topographic survey', because that's what the City's development requirements demand. The surveyor discovers that the site was once part of a much larger parcel, deeded to the son of the large parcel's owner in 1970. No boundary survey was every filed, as it wasn't required in 1970. The surveyor informs you that in order to do any kind of survey, State law requires that a boundary survey is performed and a 'Record of Survey' be created and filed with the County surveyor's office. Upon the first field visit, it is determined that the two neighboring side line fences are only 96 feet apart, not the 100 expected. Furthermore, there is an incredible lack of monument evidence in the vicinity, either in the field or on paper, and what little is found is in significant discrepancy with the record. It turns out that your additional cost for buying this little mess will exceed $20,000, and you won't even own a lot that is the size you thought you purchased.

The 'Good' Lot

Soon after, your friend buys the other property you passed on for the same price you paid for yours. She also hires a surveyor to perform a topographic survey, and the surveyor determines that the parcel was part of a mapped subdivision in 1965. In addition, a boundary survey, with a Corner Record filed with the County Surveyor's office, was done in 1994 for a sale that didn't go through. At the same time he conducts the topo survey, the surveyor is able to research, relocate, verify, and flag all 4 corner monuments from the 1994 corner record, at an additional cost of $500.

The 'Problem'

You just learned the hard way that the condition of the boundary ‘history’ can have a significant effect on the value of a lot, and it’s often overlooked by other professionals in the real estate transaction process. It’s as if there was some contaminated soil on the site that no one knew about, waiting for an excavation to be discovered (and paid for) by the unsuspecting new buyer. This is a classic ‘buyer beware’ scenario, and most title policies do not cover these kinds of surprises.

The 'Solution'

Before buying, talk to a surveyor about the property and if necessary have them perform records research and possibly field monument location for the property. You can also purchase a special type of title insurance policy called an American Land Title Association (ALTA) policy, which will require a proper survey to disclose any problems with boundaries, evidence of possession, potential encroachments, and the like. Some lenders require them for certain transactions because they can’t afford to have their client inherit a site that will create a lot of unforeseen costs and problems. When you’re looking at property, don’t overlook the effect of boundary information on the cost and impact to you and your development plans.

John S. Coffey, PE, PLS, is founder and President of Coffey Engineering, Inc. in San Diego. He’s contributed to over a thousand civil engineering, surveying, and planning projects in San Diego and surrounding communities over the past 15 years. 858-831-0111 john@coffeyengineering.com http://www.coffeyengineering.com/

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