Easement Issue - Sewer and Water Drain

[Britt Clark]

I found an off market deal with a seller who is willing to do owner financing. The seller disclosed the property sits on two easements, one for a water drain and the other for sewer. I am concerned with being able to get a clear title (and title insurance) or the ability to sell later to a future buyer who might use conventional loan. Has anyone dealt with this before? What are the gotchas and solutions? The property is located in Opelika, Alabama. Thanks for any advice.

[Chris Mason]

Originally posted by @Britt Clark:

I found an off market deal with a seller who is willing to do owner financing. The seller disclosed the property sits on two easements, one for a water drain and the other for sewer. I am concerned with being able to get a clear title (and title insurance) or the ability to sell later to a future buyer who might use conventional loan. Has anyone dealt with this before? What are the gotchas and solutions? The property is located in Opelika, Alabama. Thanks for any advice.

 I can't speak to 100% of scenarios because I don't do 100% of all mortgages in the United States, but I've never personally seen a mortgage or title insurance application declined over a standard utility easement. 

Title insurance will list the two easements as an exception to their coverage. Anyone that has a utility pole in their yard has the same thing, and lots of people have neighbor's sewer laterals below ground that they don't even know about (who here has ever read all of the 100 pages you sign at the closing table? The only people raising their hands are lawyers...). This isn't unusual, and I wouldn't consider it a dealbreaker. 

I think you're fine. However, it is super good to be concerned about "can a future buyer get a mortgage, and how does this impact value?" when you are buying without using institutional financing. I encounter scenarios not-infrequently wherein someone gets a killer deal on a property (2% rule in SF Bay Area, etc), calls me to refi, and oh whoops the REASON you got a killer deal is because none of the other buyers could get mortgages. Sometimes we find out upfront, sometimes the investor/owner is into it for an appraisal fee before we find out.