What a home buyer must know about a land survey and property appraisal

What is a survey?

A survey or land survey is an accurate measurement, drawing of the property for sale, and a legal description of the land. A surveying team goes out to the property and locates the boundaries, both natural and artificial. The land is accurately measured in terms of metes and bounds within a measured plat of land. The survey team produces a drawing which includes measurements, how the buildings sit on the land, any encroachments on the land, and an legal description.

What is the purpose of a survey?

The survey produces a legal description of the property, which is more precise than merely a street address. It identifies the actual boundaries of the property, encroachments onto this property or from this property, how close buildings are to legal setbacks, where utilities cross the land, and the actual property lines.

A survey is used by the title insurance company because the title uses the legal description of the property. The survey is used to determine if there is an easement or an encroachment by another onto the land. Legally, these things need to be addressed in order to obtain a clear title. The survey is also used in new constructions to make sure buildings conform to local building ordinances.

What is an appraisal?

An appraisal is an educated opinion of a professional appraiser as to the financial worth of the house in the current market. Lenders order appraisals to determine if the property is worth the amount of the mortgage loan. An appraisal is done so that the lender is assured that in a foreclosure the lender will probably be able to get its money out of a foreclosure.

My lender ordered an appraisal and it came back much less than what the house is selling for. Now what?

The lender is really telling you that it will not write a mortgage for the amount you requested based upon what it believes the home is worth to them in a foreclosure. You do have options.

You can apply with another lender. Be prepared to pay an additional loan application fee.
You can increase your down payment so that the amount of the mortgage loan is lower.
You can request that the lender obtain a second appraisal from another appraiser. You will pay for both appraisals.
You can attempt to reason with the lender. Be prepared to show that list of comparable homes and their selling price, inspections that show no major defects, and you might want to obtain an independent appraisal on your own.
You can find another home.

Appraising is an art rather than a science. There are few, if any, hard and fast rules about how much certain items are worth in a home.

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