Who Decides if an ILC is Needed?

By
Mortgage and Lending with The Mortgage Experts at America's Mortgage, a Division of Cherry Creek Mortgage Co. NMLS #241555
http://actvra.in/qY

We are seeing an increasing number of title companies requiring an improvement location certificate (ILC) before they will issue a title insurance commitment.  An ILC differs from a survey in that the ILC simply identifies the location of the property improvements (buildings), encroachments, and easements, but it is not evidence of the exact boundaries of the property.  Although it is not a full survey, it's usually sufficient documentation for properties that are located within subdivisions.  It is less expensive than a survey, also. 

If a real estate agent enters "N/A" in the survey section of the sales contract, indicating that an ILC is not needed, that has absolutely no bearing on whether an ILC is actually needed.  The title company decides whether they need one before they will issue the title commitment.  If the contract states that an ILC is not needed, but the buyer will pay for it if it is needed (we see this a lot), then your buyer is on the hook for the ILC fee if the title company needs one.  On deals where money is tight for the buyer, this can be a big problem.

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Rainmaker
125,758
Chris Thomas
The Mortgage Experts at America's Mortgage, a Division of Cherry Creek Mortgage Co. - Denver, CO

Mary -- Good advice about calling the title company and asking if the ILC requirement can be removed.  We always ask and about half the time, they will delete it. 

My wife used to be an underwriter for a lender and her advice to me has always been to ask why an underwriter is requesting something that seems a little odd.  Sometimes the response we get is, "Gee, I don't have any idea why I asked for that - I'll just delete it." 

Ask and you shall receive (sometimes) :-)

Thanks for your comment!

Jul 22, 2009 10:34 AM #2
Anonymous
Wayne

Why in the world would you not get a survey or ILC. It seems very unprofessional (at best) and very liable (at least) to recommend that a survey not be done. So what if the title company does or does not require a survey, what if there were easements that effect the property that the garage encroaches into? What if the driveway is larger that what city code requires? What if the fence is 5 feet beyond the property line? If there are problems and an ILC is not conducted, a problem could sit dormant for years. And then not until a new ILC or survey is conducted will anyone ever know. -By recommending that an ILC NOT BE DONE are you trying to sweep problems under the rug? Are you trying to "save" some money?

An ILC can give very valuable insight to a a property. And not recommending that an ILC be conducted is derelict in professional responsibility and becomes a problem waiting to happen. If there is an encroachment and YOU advised your client NOT TO GET a survey done, I'll bet YOU will be named in the legal batter that ensues.

 

 

May 08, 2010 11:42 AM #3
Rainmaker
125,758
Chris Thomas
The Mortgage Experts at America's Mortgage, a Division of Cherry Creek Mortgage Co. - Denver, CO

Wayne - You sound like an angry surveyor who is down on his luck.  Thanks for the legal advice. 

May 10, 2010 08:30 AM #4
Anonymous
Wayne

Chris- I must refer you to the Colorado Division of Real Estate - Real Estate Manual, Chapter 16, Article VI, page 16-11. Pay particular atentionto the last two sentances.

 

http://www.dora.state.co.us/real-estate/manual/Manual_2008/Ch16_Contracts.pdf

 

 

 

 

 

May 11, 2010 11:32 AM #5
Rainmaker
125,758
Chris Thomas
The Mortgage Experts at America's Mortgage, a Division of Cherry Creek Mortgage Co. - Denver, CO

Wayne - What are you talking about?  The ILC I was referring to in my blog post is an Improvement Location Certificate.  The ILC your link refers to is an Installment Land Contract.  They are two totally different things.

May 11, 2010 11:59 AM #6
Anonymous
Wayne

Chris, The chapter and verse that was linked was (is) about land surveying, surveys, ILC's, et al and a responsibilty of a broker, not about Installment Land Contracts...??

 

FYI Chapter 16, Article VI reads as follows:

 

 

 

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VI. Surveys

 

"Many properties have not been properly surveyed. This is true particularly in areas that have not been formally subdivided into platted parcels. Some subdivided areas also contain irregular lot sizes and the survey may be questionable. Both in frontage in running feet and the acreage, which determines square footage, are important and both should be verified before quoting figures to a buyer. In some cases, improvements, such as fences or garages, encroach on boundary lines and only a survey will reveal the problem. A broker may be liable in such situations because brokers are assumed to have greater knowledge than that of buyers and sellers. The broker should recommend to both a buyer and seller that a survey be made. (See Chapter 7)"

 

 

 

 

 

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May 11, 2010 04:40 PM #7
Rainmaker
125,758
Chris Thomas
The Mortgage Experts at America's Mortgage, a Division of Cherry Creek Mortgage Co. - Denver, CO

Wayne - Please read my original post again.  I'm not quite sure how you're interpreting it to say no one should get a survey.  If a real estate agent wants to get a survey or an ILC to protect their client, then they should go right ahead and get one.  My point is that it doesn't matter at all what the agent puts in the contract.  If the title company doesn't require one, then the lender doesn't require one.  I, as a lender, will never tell someone to get a survey or an ILC unless the title company requires it.

According to the real estate manual, it looks as if the agent assumes some liability if they recommend the buyer not get one, but the lender sure isn't liable.  There is a huge difference between the function of the agent and the lender, and most people in the industry don't realize that.  The agent sells the property.  The lender sells the loan.  Neither party is responsible for what the other party does or doesn't do. 

A lender's responsibility is to honestly represent to the buyer the terms of the loan and the costs of the loan.  I will never tell someone that they have to pay for something they don't need to get the financing. 

The truly hilarious part of your position is that if an agent ever did insist on a survey or an ILC when one was not required by the title company (I have NEVER seen an agent do that, by the way), they would probably expect the lender to lower his fees in order to pay for it.  Here's my solution: If you want all your clients to get a survey, pay for it out of your commission. 

May 11, 2010 07:35 PM #8
Anonymous
Wayne

Chris - I guess I understand your position as a lender, but you keep going back to it being a title company issue or title requirement, which should not be the issue here. The matter really should be left up to the buyer.

 

The Forms Committee for the Colorado Real Estate Commission and the Department of Regulatory Agency  realized and debated this very matter a couple years ago, and because of the misinformation and the ambiguity surrounding the Brokers responsibility and in the best interest of the general public, the Forms Committee modified the real estate Contract to Buy and Sell Real Property. The new contract in Section 7 addresses the Survey / ILC issue and lets the seller decide directly if they should get an ILC or Survey and who will pay for it.Thus subsiquintyly adding the language in Article VI, Chapter 16 of the Colorado Real Estate Manual and the potential exposure an agent has concerning survey issue.

 

 

May 12, 2010 08:45 AM #9
Rainmaker
125,758
Chris Thomas
The Mortgage Experts at America's Mortgage, a Division of Cherry Creek Mortgage Co. - Denver, CO

Wayne - I agree entirely that it should be left up to the buyer, but educating the buyer about that is the real estate agent's responsibility, not the lender's.  I don't know very many agents who tell their buyers that they should get a survey or an ILC if it's not required by title.  Actually, I don't know any.

Most agents (and lenders) are under the mistaken assumption that the best way to sell is by price alone. Everyone goes on and on about service, but it really all boils down to price.  If you're an agent and you're selling on price, then you can't tell a buyer that they should really pay an extra $500 for a survey that no one is requiring. 

As a lender, my job is NOT to advise the buyer about the risks involved in buying a particular property.  In fact, I am not allowed to have anything to do with the negotiations because I'm not a licensed real estate agent. 

Again, read my original post.  What you say may make sense, but it is an entirely different topic.  You're barking up the wrong tree.  If I start publishing posts saying people should cheat on their loan application, or make up phoney pay stubs, or lie about whether they're going to occupy a property, then by all means rip me a new one.  But please don't tell me I'm being unprofessional because people in a different profession aren't satisfying your needs.

May 12, 2010 02:19 PM #10
Anonymous
Wanye

Chris,

 

To the contrary, not my needs, but the buyer's needs and best interest.

 

BTW - I do believe that my discussion is pertinent to the main topic and the title of your original post "Who Decides if an ILC is Needed"

 

 

 

May 12, 2010 03:09 PM #11
Rainmaker
125,758
Chris Thomas
The Mortgage Experts at America's Mortgage, a Division of Cherry Creek Mortgage Co. - Denver, CO

You get the last word.  I cry uncle.  Please, no more!

May 12, 2010 06:33 PM #12
Anonymous
Doug M

This is a very interesting issue.

 

I talked with my managing broker concerning this topic and his response is that in this market when filling out the contract, that I should suggest we complete and check that the seller supply and pay for up $200 for a new ILC. All things considered he feels it is cheap insurance.

May 14, 2010 08:00 AM #13
Anonymous
Andi

Hi, I'm a Title Examiner with a title insurance company. Generally speaking we will not require a survey or ILC to write a policy. However, if standard exceptions 1 through 5 are asked to removed and insured over, a survey will be required. Additionally, if there are known encroachments or if the legal description is ambiguous or if new improvements (including fences) have been built by the seller, a new survey or ILC will be required. All mountain properties and acreages require a survey.

Jun 08, 2010 08:27 AM #14
Anonymous
Donna Wells

DO NOT LISTEN to real estate agents. They ONLY serve their own interests. YOU MUST get a survey on the property you are buying. My agent told me NOT to get a survey and save money. Only to find out 2 months later when installing a fence for my little dog that the property line is 5 feet closer to our house than where the realtor said it was. Now the realtor is not owning up to it. I"M TALKING TO MY ATTORNEY, but says my chances are low  in holding the realtor liable. = I wish I would have had a survey done before buying my property, now it's costing hundreds of dollars to find out that the lines are different than he told me.

Aug 05, 2010 12:16 AM #15
Anonymous
Surveyor in charge - FYI

FYI - Just thought i would let you know that this thread is being followed on a national land surveying website

 

http://surveyorconnect.com/

 

http://surveyorconnect.com/index.php?mode=thread&id=41265

 

 

Dec 30, 2010 10:38 PM #16
Anonymous
Joe attorney

If you use an attorney instead of a realtor for closing you'll save a lot more than $500 and have a contract that protects YOU instead of protecting the realtor.

Dec 31, 2010 01:30 AM #17
Anonymous
Just an observer

Why would anyone ever not want a survey?

A survey protects the investment by ensuring the property is what it was represented to be, by checking on potential conflicts and encroachments, and so on.  

It's in the best interests of not only the buyer, but all parties, such as the title insurer, the lender, and the realtor.  It protects the lender by protecting the lender's investment.  It protects the title insurer by limiting their liability.  It protects the realtor's reputation, as they will get painted with the same brush as the seller, if things turn out to have been misrepresented.  It even protects the seller in that regard - if boundaries are erroneous or have been misrepresented, that can result in a lawsuit, dragging all parties in.

When folks in any segment of the real estate business suggest that land surveys are optional, unnecessary expenses, they put all parties at potential risk for liability and far greater hidden cost and expense - and that tends to cast doubt on the professionalism and integrity of the parties involved.  Why expose themselves and their clients to unnecessary, hidden risk, when it can be easily mitigated through a survey?

Unless a good, recent, reliable survey already exists, the default approach in any real estate transaction should be that a survey is needed.

Dec 31, 2010 10:07 AM #18
Anonymous
D G Graham OLS OLIP

Chris-

 

The only connection between the deed and the actual parcel of real property is the surveyor's opinion.

 

Why is it not the best professional practice to provid the comfort to the purchasor/lender that what one sees is really what one is getting?

 

Otherwise it's a very expensive crap shoot.

 

YOS

 

Derek G. Graham OLS OLIP

Professional Surveyor

Graham Surveys

Elora, Ontario, Canada

 

 

Dec 31, 2010 02:20 PM #19
Anonymous
my2cents

How does one accurately locate improvements in relation to a property line when the location of the property line has not been accurately located? Sounds to me like an ILC is a worthless piece of paper.  It's like saying that the house is 2 feet from the fence line yet the fence is 15 feet into the adjoiner's property, but we do not think there are any encroachments. The ILC concept as stated is absurd!

Dec 31, 2010 02:37 PM #20
Anonymous
Colorado Land Surveyor

In response to my2cents

"It's like saying that the house is 2 feet from the fence line yet the fence is 15 feet into the adjoiner's property, but we do not think there are any encroachments."

 

If that situation was to occur, the surveyor involved that signed and sealed to Certificate would be 1) liable to whom he certified the certificate to for any monetary loss the property owner sustained; which might include a) removing and replacing the fence, b) acquiring the property the encroacher was situated on, c) pay the dollar loss an appraiser or court would place on the property as a result of the encroachment; 2) the involved surveyor who prepared the fraudulent and erroneous ILC would be brought under sanction, fine or loss of licence to practice land surveying by the Colorado State Board of Licensure by the Colorado Department of Regulation

 

 

"How does one accurately locate improvements in relation to a property line when the location of the property line has not been accurately located?"

 

Colorado state law that regulates land surveying and the preparation of an ILC dictates that if a Professional Land Surveyor can not accurately determine the deed lines of if he can not accurately render an opinion as to an apparent encroachment, that he will recommend that a boundary survey be conducted.    

 

"The ILC concept as stated is absurd!"

 

To the contrary, a properly prepared ILC, conducted by the standards as set fourth by Colorado State Law is likely the most valuable and insightful document at a closing table.  Especially if an encroachment exists. Had an ILC not been conducted, the problem could sit dormant for years, only to have to be dealt with at a later time, usually during a time of stress. 

 

Ronald Flanagan,

Colorado Professional Land Surveyor

www.CoPLS.com

ron@copls.com

303-761-8055

 

PS - Please e-mail me or call me if you would like additional information concerning this matter.

Jan 02, 2011 01:09 PM #21
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