The Importance of Property Access: A Buyer, Seller and Lender Perspective

The Importance of Property Access: A Buyer, Seller and Lender Perspective

Legal property access is an important part of owning a property. Obtaining a piece of landlocked property can be a cost-effective option when buying land. As a buyer you may not mind the lack of access; however, when it comes time to sell, that’s when the issues might become visible. On the other hand, you also need to know what rules are created by an easement when purchasing a property with an easement on it. We’ll take a closer look at access easements and what buyers and lenders look for when trying to sell.

What does “landlocked” mean?

Landlocked property does not have a direct access road to it. The only way to access a landlocked property would be by travelling through a property owned by someone else. In some states, a person without property access is given the right to pass over private land surrounding their property; however, they may not disrupt the property they are using to pass in any way. In other states, you must file for legal access in the form of an easement. The property granting access is called the servient tenement while the property benefiting from the easement is called the dominant tenement.

Easement types

There are many types of easements but the two most common are easement by necessity and easement by prescription. An Easement by Prescription is one that is created through continued use and implication. The length of time in use is set by state law but can range from ten to twenty years in most states; the access must be continual and with the owner’s knowledge. For instance, if you owned a landlocked property and used a dirt access road that your neighbor gave you permission to use for 20 years, a new servient owner could not take away that easement since you now have an easement by prescription. An Easement by Necessity is an easement granted by the court because there is no other way to gain access to the dominant property, except through the servient tenement. A Party Easement is a written agreement between both parties for use of common boundaries or access points.

It is also important to note that there are two different easement classifications. An “appurtenant” easement is deeded and can be found by a simple title search. An “in gross” easement will likely not be found in a title search. With these easements the servient property cannot transfer rights to the easement during a sale. These are easements such as those held by utility companies.

Why do easements matter?

For Lenders: Lenders look for legal, transferrable access to a property. Since they are making the loan, they want to know that access will be available in the event that a property has to be foreclosed on. Lenders will not finance a loan without legal access; this can end contracts and create smaller buyer pools. Now let’s look at how this can effect both buyers and sellers.

For Sellers: It’s tempting not to fix an access issue before selling because it can create extra work for the seller.  Some sellers hope to simply reduce the price of the property so they do not have to fix any access issues themselves. However, fixing access issues before the sale of your property can not only fetch a considerably higher price, but it also creates a larger buyer pool. Since lenders will not finance a land loan on land without legal access, a buyer will only be able to purchase if they are able to pay cash or owner financing is available. If an owner is unwilling, or unable, to owner finance then the buyer pool will be reduced to only cash buyers.

For Buyers: The land you want may be a deal if it does not have legal access but since lenders will not approve a land loan on properties without legal access, you may not be able to purchase the property at all. You’ll need to figure out if owner financing is available or look at how much cash you can afford to spend to purchase the property outright. If you want to continue with financing the property through a lender, the access will have to be legally granted before the closing can take place. This could be a short process or take years to fix. It is also important to know what easements are on the property you want to purchase. You’ll need to understand what rules are involved in those easements, if they will transfer with the sale of the land, and where they are located. If the location of a legal easement interferes with your plans for the property you may need to find another suitable spot for those plans.

If you are unsure whether a property has legal access make sure to ask your agent and the individual preparing title for your sale. Access is something that is searched during the title process. When you are ready to purchase land, make sure to contact Land Line Lending to learn more about current rates, terms and to get pre-approved for a land loan.