What is an easement and how does it affect my property value?

What is an easement?

If you’ve ever purchased real estate it’s quite possible that the property may have been subject to aneasements-and-property-value easement. Easements are common and a lot of properties have them without the owner even being aware of it.

The easement is something that is included in the legal description as well as other documents when you purchase real estate  but you may not be aware of it unless you read the fine print.

An easement is a property interest that allows the easement holder to use property that he or she does not own or possess.

It does not allow the easement holder to occupy the land, or to exclude others from the land, unless they interfere with the easement holder’s use.

The person who owns the land is allowed to use the easement and they can also prohibit everyone else from using it except for the holder of the easement. A common example of this that I see when appraising homes is a driveway that goes across one person’s property to get to another one.

This is not uncommon when a portion of a larger parcel is sold off and the easement is put in place so that a driveway can be created to provide access to the interior lot from the street.

Another type of easement can involve public utilities such as for power lines or sewer drains. In these instances the owner has full use of the easement but they have to allow access to city employees or workers who may need to do repair work.

Do easements affect property value?

For the most part easements do not create a negative effect on your property value unless it severely restricts the use of the property. Most property owners still have full use of the property and do not experience any negative consequences.

Because easements are common, many properties may have them. The more common a certain type of easement is the less impact it will have on value because buyers have come to know about it and accept it.

To determine if the easement has any type of positive or negative effect on property value it would be necessary to look at what other properties are selling for that do not have the easement.

By comparing non easement sales with easement sales you’ll be able to determine if the homes with the easement sold for more or less than the others. Sometimes there may not be any sales available in your subdivision so it is acceptable to go to other neighborhoods in the immediate area that have homes that are similar in age, style, quality and price to see what is happening there. By doing this you’ll get a good idea of how other buyers reacted to the presence of easements.

Another method to determine the market’s reaction to the easement is to look at past sales of the subject property. By comparing its previous sale price to what other similar homes sold for at the time of the sale you can get some context for how the easement might influence the sale price.

If you’re fortunate enough to have data on both of the above methods you can compare the two indicators and reconcile between the two.

When attempting to find out exactly how the market reacts to an easement there are several things you will want to consider:

4 Things to consider about the potential impact of an easement

  1. How common are easements in your area? If every property in the neighborhood has an easement they may be so common that no one cares about it and it has no impact because it’s known and expected.
  2. How big is the easement? A large easement on a small parcel may be more negative that a small easement on a larger parcel. This may also affect the utility of the lot, meaning that you may not be able to get maximum use of the lot because the easement takes away from the useable area.
  3. What impact does the easement have on the use of the property? Does the easement take away from the useability of the lot by being larger than typical?
  4. What are the terms of the easement? If a municipality has an easement over your property it would be good to know exactly how  much access they have. Having limited access would probably be better than free reign over the property. You would also want to know if you can build on the easement or if there are any other restrictions.

Question

Can you think of any other questions regarding easements? If so then leave your thoughts below and we’ll keep the conversation going. As always, thanks for reading.

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Comments

  1. Tom, another great article that is spot on. Another reason to have a reliable title company to look into these issues.

  2. John O'Mera says:

    Hi, this may sound confusing but I’m going to try to explain.

    I live in a 2 family house. There is a 2 family house next door and we share the driveway. 45 years ago, the owner of the property next door built a carport that extended approximately 4 feet onto this lot. Everyone got along fine until the owner that built the carport put the house on the market. The owner of this house offered to give him an easement so it would be on record for anyone that may buy the house with the carport.

    The owner with he carport verbally stated that he wanted the easement but delayed hoping to sell the house before the easement was recorded. Of course, this is where it goes downhill. When the owner of this house purchased the property 10 years ago, the title search and survey never caught the encroachment. Nobody knew about it. Since the easement that was offered never came to fruition, the owner of the person selling the house was served with a “notice of no easement” to ensure that future title searches would flag the encroachment.

    This enraged the person trying to sell the house because he had been using the land for 45 years. Out of anger, he built a fence on the property line and cut 5 feet off of the carport. This left the carport too small to park a car and now the land on his property is only wide enough for a motorcycle at best. He gave up all vehicle access to the driveway.

    The question is this. Why put up a fence? He had been driving over the land to gain access to the carport for 45 years. People seem to have different interpretations on who is allowed to use the driveway since he has been using the land for so long. Does putting up the new fence mean he has given back the right to continue using the land? Very confusing.

    Now the owner of this property has more room for parking and never has to deal with people going over the land. Obviously the land has a better market appeal. Properties in this area have very small driveways. Some houses have no driveways.

    For the record, I’m an appraiser and so is the owner of the house that offered to give him the easement. Don’t judge us, we just can’t seem to agree on the possible value of getting the parking back and whether or not the fence should have been built at all.

    Everybody seems to have a different opinion. This would be an interesting case study.

    • Wow John, that seems like a headache. I’m not sure I have an answer but I guess the best case scenario would be to try and do what the original owner wanted originally. Hope everything works out.

  3. Thank you for the post on easements Tom. Very well covered. One thing that your readers might find interesting is that when the easement becomes disputed, the appraisal can be expensive. In past appraisal assignments, I’ve been asked to only find the value of the easement and in those assignments, the cost of the appraisal has been almost as much as the value of the easement.

    • Great point Gary. Most people don’t realize that most easements are not work much, however that totally depends on the situation. Thanks for your real life story.

  4. Nice job Tom. It’s always good to consider easements. How would you recommend owners finding out if they have easements on their site?

    • Great questions Ryan. There are several ways to find out if your property has an easement. You can look at your legal description and/or title work as I have seen them listed there. If it is a utility easement you should be able to call the utility company or go to your court house and ask to see a map of utility easements in your area. In addition, if a survey was done on the property it should also show where it is located.

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