Taking out a mortgage means there are reams of papers to be signed. Two things you’ll see are a survey and an appraisal. One defines the limits of your ownership and the other assures the mortgage holder that the property is worth the loan amount. Both are as important to you as they are to the mortgage company, because each represents information about your property’s value.
Types of Surveys
A survey is like a map of your property. Different types of surveys provide varying levels of detail. A boundary survey is one in which a licensed land surveyor comes to the property and uses existing surveyor’s benchmarks to establish its location and dimensions, and marks the corners with markers called "pins." By connecting these pins, you can see your property's boundaries. A mortgage survey will not mark the corners and may not even establish where the property boundaries actually lie.
Mortgage Location Survey
Mortgage surveys come in two flavors. The first, a mortgage location survey, is detailed. It shows all easements across the property, such as those for utilities. This type of survey also shows encroachments – for example, where your neighbor’s garage is partially built on your property – that may diminish the value of your property. It may establish the location of the property's boundaries, but the surveyor may not mark the corners.
Mortgage Inspection Survey
The second type of mortgage survey is a mortgage inspection survey. It may show the location of your home and any outbuildings only. It may not show the boundaries of your property, or if it does, the boundaries shown will be based on information found in local county records. It may not reflect changes in the boundaries since those records were filed. Where this type of survey is permitted, the surveyor relies on solely information provided by the lender.
An appraisal is an informed opinion of the monetary value of the property as of the date of the appraisal. A property appraisal is provided by a state-licensed real estate appraiser. The appraisal is based on factors such as the value of similar homes in the area, proximity to schools, churches and shopping, or the age of the home. The monetary value of a piece of real estate can change with changes in the value of money. This means the property you purchase for $100,000 today may well be worth $1 million in the future -- or it may be worth $10,000 in the future. Your mortgage lender wants to make sure the appraised value of your property is at least equal to what you have agreed to pay for it.
Will Charpentier is a writer who specializes in boating and maritime subjects. A retired ship captain, Charpentier holds a doctorate in applied ocean science and engineering. He is also a certified marine technician and the author of a popular text on writing local history.