An encroachment occurs when a neighbor’s structure or object extends onto your property without permission, breaching your property boundary. This may involve fences, driveways, buildings, landscaping features, or even overhanging elements like tree branches. While often unintentional, encroachments become significant during real estate transactions and loan appraisals because they affect ownership clarity and property value.
Lenders require a clear title and accurate boundary definitions to secure their investment in the property. An encroachment creates uncertainty — a “cloud on the title” — that can delay or block loan approval.
Why Do Lenders Care About Encroachments?
Mortgage lenders use the home and land as collateral for the loan. If there’s a legal dispute over boundaries, it increases the risk to the lender. An encroachment can:
- Reduce property value since part of the land is disputed or subject to neighboring use.
- Lead to costly legal disputes involving future owners.
- Cause difficulties during resale, impacting marketability.
Because of these risks, appraisers inspecting a home for a loan will check for signs of encroachment. They may recommend a formal property survey to confirm boundaries and legal descriptions.
How Encroachments Are Identified
The most reliable way to identify an encroachment is through a professional property survey. Surveyors measure legal boundaries precisely and document any structures crossing those lines. Loan processes often require an updated survey before final approval.
Appraisers, while not surveyors, often spot potential encroachments during their inspection. Visible signs like crooked fences or overlapping driveways prompt a recommendation for a formal survey to verify property lines.
Types and Severity of Encroachments
Encroachments range from minor, often acceptable intrusions—like a fence a few inches over a property line—to major structural encroachments such as garages or home additions extending into a neighbor’s land.
Lenders usually differentiate:
- Minor Encroachments: Typically do not affect the loan if neighbors agree or the issue is trivial.
- Major Encroachments: Require resolution by removal, land sale, easement agreement, or legal action before loan approval.
Resolving Encroachments
Common solutions include:
- Open communication between neighbors to adjust or remove the encroaching structure.
- Selling a small portion of land to the neighbor if relocating the structure isn’t feasible.
- Granting an easement, a legal right allowing the structure to remain, clearing title concerns.
- Seeking a court order to remove the encroachment as a last resort.
For more on easements, see our article on Easements.
Additional Resources
Understanding property surveys and their role in boundary disputes can be helpful. Visit our Property Survey page for more details.
Loan appraisals cover many other critical factors. See more about the Loan Appraisal process for a broader context.
References
- Investopedia: Encroachment In Real Estate: What It Is And What To Do
- Forbes Advisor: What Is An Encroachment In Real Estate?
- IRS on Property Surveys: IRS Publication 530 (for tax considerations related to property improvements and boundaries).
Properly addressing encroachments ensures smoother loan approvals and protects your property investment.
