Your buyer clients may, at some point, use the term "survey" for documents they're receiving in the closing of a real estate transaction. In many cases, especially for properties located in cities and towns, full surveys that carry surveyor liability and warranties of accuracy are not needed.
Lender Assurance of Boundaries
During the underwriting process, the mortgage company and title insurer involved in a real estate transaction will want some assurance that the property being purchased is actually completely situated on the plot named in the sales contract. Mortgage companies also want to know that there are no significant encroachments of other adjacent property issues.
Improvement Location Certificates
The information needed to provide the assurance can be compiled in an improvement location certificate, or ILC, for less cost than a survey and in a shorter period of time. ILCs are certified by licensed surveyors, but they are not surveys. Their purpose is to provide the location of the structures and improvements in relation to property boundaries as noted on the deed. It is important to note that the measurements and boundaries in ILCs are estimates and not exact numbers; language in ILCs clearly states that the numbers are estimates. When lenders have questions about the validity of the estimates included in ILCs or have concerns that encroachments may exist, they order full surveys.
In a nutshell, ILCs address the following:
- Encroachments: The certificate confirms the location of buildings and structures and notes any that cross-boundary lines or easements.
- Legal description: ILCs confirms that the property's legal description is accurate. This is important for title accuracy. The certificate also confirms that the property address is correct.
- Up-to-date survey: The certificate confirms that the survey is current and accurate. Lenders may ask for a copy of the survey to close a new construction home.
- Easements: The certificate confirms that all easements are documented and accurate.
- Fences are a hot-button issue for mortgage underwriters. If a fence exists and it's not on the property line, a survey may be needed.
Survey vs ILC
Most ILCs state that they are not to be used by the property owner in any way and that they are only for the use of the title insurer and mortgage company. So, be sure that when your clients use the term "survey," that you clarify exactly what they're getting. They need to know that an ILC is not used for purposes that require a survey.
For example, some clients may wonder if having an ILC provides them with enough information to build structures, such as fences, on their properties. Buyer clients should be informed that ILCs are not accurate for such purposes and that they should order a full survey before undertaking any property improvement projects. Only surveys conducted by licensed surveyors can establish property lines. Clients buying land without any existing structures should be strongly advised to order full surveys before undertaking any construction projects.
Ordering an ILC
Anyone can order an ILC including homebuyers, sellers, and mortgage companies. Consumers should be aware that ILCs can cost as much as $350, as of publication.