Contract to Close: Lender Survey of the Property

In addition to the bank performing an appraisal (having a neutral party take a look to make sure they’re not putting a lot of money down for a lemon), the bank almost always orders a survey of the property This is in part because the title company requires one. A survey is most basically described as showing the boundaries of the property you are purchasing along with structures on it.

Surveys serve to show that the buildings (main structure, garage, etc) are actually within the legal description of the piece of property being purchased. It also makes note of new additions and structures that may have been built by the previous owner.

For boundaries to be verified, there must be an existing legal description of the land. In some cases segments of property that naturally seem to belong to one property actually belong to another, and on rare occasions this can be quite significant- like a large portion of a backyard.

For buyers purchasing condos, a survey is actually not required. When the building’s developer bought the land and constructed the building, a survey was performed then. As an owner of an individual condo within the building, ownership is usually “from paint to paint” inside the common walls and the whole building’s location is therefore not specifically your liability.

Survey’s may look into easements and encroachments- these are sometimes referred to as “location surveys.” They establish whether the property’s buildings are within its legal boundaries or not. If the property’s garage hangs over the other neighbor’s property and no solution is in place, then a lender would be nervous about the buyer being required to pay for a remedy through construction. Similarly, if the property has a driveway that actually overlaps the boundary of the neighboring property and an easement is not in place that allows it to be used, the bank would be wary of this making the property less desirable (since it doesn’t have a driveway that can be used) and therefore decreasing its value.

More commonly a lender’s survey will simply take a cursory look to verify which buildings and improvements are present on the property. If it is not questionable whether these cross legally described boundaries, looking into precise property boundaries is usually not performed.

Like a number of other processes in the contract to close process, the lender’s survey usually does not raise an issue. However, it is still a necessary step because of the major trouble and headaches it can spare a buyer from when it does uncover a problem. With a home purchase often being the largest purchase in a buyer’s life, it’s worth the precaution.


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