What is an easement?
If you’ve ever purchased real estate it’s quite possible that the property may have been subject to an 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
- 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.
- 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.
- 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?
- 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.
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.