How much is an easement worth?

janmo_ncSeptember 5, 2007

A local builder contacted me this morning. He has purchased a field behind my home and plans to build three houses. But, his only access to city sewer is through my property, about 150 feet. It will come down the edge of my land and across the front, near the road. He wants me to name a price, and I have no idea. Any suggestions? He is coming over this evening to show me exactly what he wants to do.


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Talk to a real estate attorney.
Good luck.

    Bookmark   September 5, 2007 at 4:34PM
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several questions.How large is your lot? width and length? You realize that an easement containing a sanitary sewer line would likely need to be at a minimum 10' wide? Would the easement also carry other utilities such as storm water? Gas/electric? Who pays the insurance claim or suit if someone falls/trips over an exposed manhole? Also if the sewer line has a problem,and needs to be excavated, anything nearby will be trashed.Will you be compensated for that if it ever happened? There are many issues that would need to be addressed before you could arrive at a dollar value

    Bookmark   September 5, 2007 at 4:36PM
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Say 5 million, he will give his offer and you go up from there.

He wants you to make the first offer hoping your offer is less than he is willing to pay.

Think about how much money he will make building those three homes. Can he get to the water supply from a neighbors yard?

Let him make the first offer.

    Bookmark   September 5, 2007 at 4:38PM
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I assume he'll pay all the legal fees associated with the easement, and that would include the land surveyor,engineer, filing of deeds, etc...Don't forget you ususally can't build in an easement, so hopefully you won't need the property for future expansion of house..Honestly, unless you have a large lot,whereas the easement won't affect you, i'm not sure you can get enough $$$ for the aggravation you'll go of luck

    Bookmark   September 5, 2007 at 4:49PM
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I've always heard that the first person to name a price is the loser.

My lot is one acre and the easement would only be used for sewer, not water or elec. The location really won't be a bother, and I don't have a problem with it. I have already asked him about insurance, a new survey, future problems, etc, and he said we will cover all of that in the contract. Also, my 83 year old neighbor knows him well (when I asked if he knew him, he said, "Oh yeah, he made his millions in roofing!") and said he is as honest as the day is long : )

Septic tanks in this area are a minimum of $5000/ea so I am saving him $15,000 just to start.

    Bookmark   September 5, 2007 at 4:52PM
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I will never build in that area. He did mention that he will throw in some land so that I have more of a buffer zone between my barn and the houses, so I'm sure he will try to use that as a bargaining tool. But I really don't need it. And my clothesline is on his land (old homes where people shared everything) and he said he would move it. What I really hate is losing the field (shared garden) but it was bound to happen as they just four laned our main road...and so it starts.

    Bookmark   September 5, 2007 at 5:00PM
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Careful of what you agree to. Unless the easement specifically states in the contract for the use of a sewage pipe only he could end up using that land as access to those houses behind you while he builds.
You may also be saving him more than that 15 grand if the houses won't pass perk. you maybe saving his whole project.
I'll also warn you just because a person has been honset in the past with his business dealings doesn't mean he will be this time. Stuff happens. Business relationships are complex. He may have a partner or co-owner whose not as nice as he is.
I'd find out before you sign too what the implication is if you ever decided to sell your property. A easement may not go over well with a future buyer.

    Bookmark   September 5, 2007 at 5:48PM
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Thanks so much for all the advice. He will be coming over shortly and I have written everything down to discuss with him. I forgot to mention that he will be building a house of his own to the right of the property so he will also be my future neighbor. The lot he is building on has a septic.
Thanks again to everyone. I think I will follow gammyt's advice and start at 5 million : ))))

    Bookmark   September 5, 2007 at 6:17PM
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I use an appraiser who's also an attorney. You'll need both, especially an appraiser to determine the value of the easement.

    Bookmark   September 5, 2007 at 6:50PM
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one of the three houses in return sounds like a fair deal to me ;)

    Bookmark   September 5, 2007 at 8:32PM
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He just left, and a price was never mentioned. He suggested I contact an appraiser so that is what I will do next.

As far as a new house, I did start thinking I could use a new roof, and the sunroom needs some work : )

Thanks again for all the help!

    Bookmark   September 5, 2007 at 8:41PM
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what did he say ? Did he show you a plan? Or was this just a meet and greet meeting? Remember, he needs you much more then you need him

    Bookmark   September 5, 2007 at 8:44PM
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Make sure that he picks up the tab for any assessment or any other survey related work done in regards to this....and also make sure that you use the professional(s) of your choice not someone recommended by him.

There must be an alternative to this but obviously since it is either too expensive or not viable and that is why he has approached you. If somehow you can find out the cost estimate of this alternative than you will be in driver's seat. And then you can negotiate with that estimate as you benchmark for your negotiations.

If you will take the approach suggested by him then you will be starting from bottom with your estimate as floor and may risk losing your leverage and may not get the best deal out of it.

    Bookmark   September 5, 2007 at 9:06PM
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When you do get to a point where you are ready to make a deal get everything in writting AND read it over, have your lawyer look it over and then don't rush into signing it.

    Bookmark   September 5, 2007 at 9:16PM
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And by all means don't use the appraiser he suggested, if any. Find your own.

The value of the easement to you is to compensate for the lost value when you go to resell. Many people might shy away from a parcel that had an encroachment on it so it could become an incurable defect affecting your resale value more than just the value of its square footage. You'd be giving up (valuable) frontage and you and your successors would own property without the absolute right to use it as you see fit all the while continuing to pay property taxes on it.

For him the value is in what he saves, or becomes able to do only if he can get the easement to his otherwise worthless property behind you. And in my area, at least, the number of lots permissible if you have public water and/or septic jumps up much higher than what is OK with a septic. Your easement could make the development potential of the land behind you soar, while doing nothing, or even devaluing, your market value.

You need a RE attorney and a good appraiser in order to protect your interests.

You may get more than you may think.


    Bookmark   September 5, 2007 at 9:48PM
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Thanks, again.

This was more of a meet and greet, but he did show me what part of my yard it would effect and explained how it worked. And he did not suggest an appraiser, and did say he would pay all fees.

He said the only alternative, besides septic, would be having to pump it up hill through his own personal lot.

My biggest concern is resale. Will keep you updated!

    Bookmark   September 6, 2007 at 4:41AM
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Are you sure he owns the property or does he only have an option on it?

    Bookmark   September 6, 2007 at 4:50AM
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Limit the easement to sewer (as the other poster mentioned) and limit it to the number of houses being discussed. If this is actually going to end up being used for more houses you should get more money.

Also, he maynot be able to put in septic systems, so that may not be an alternative for him. Many places do not allow septic once sewer is available. I've also never heard of a $5k septic system - that is super-cheap.

USE AN ATTORNEY! Personally, I think $15k is too low, it could easily lower your property value by more than that.

    Bookmark   September 6, 2007 at 11:15AM
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>"He said the only alternative, besides septic, would be >having to pump it up hill through his own personal lot."

This sounds like a real good solution to me.

    Bookmark   September 6, 2007 at 2:13PM
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Septic costs vary greatly. If the property passes the perc test, then around here, a septic can be had for 10K or less. If it is more challenging, ie a raised bed, you can easily be looking at $22K for a septic. A friend of mine who is a builder showed me an area that is fairly wet and said the septic on that lot could easily top $30K. So it all depends on conditions.
I would not buy a house with a septic easement. Gas would be okay with me, but septic lines may cause more maintenance grief down the road.
Let him have the pipes on his lot.
Good luck.

    Bookmark   September 7, 2007 at 9:45AM
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I have never heard that septic sewer pipes are a maintenance problem. Some people here make it sound as if those need to be replaced every other year or so...

How often have you seen a city dig up "broken" septic sewer pipes ?!?

For all practical purposes, unless you want to build where the easement goes, it'll have no direct impact. I even doubt that it'll be a problem for re-sale (unless it takes up a huge chunk of your property).

It'll be a nice gesture, if you agree to the easement for fair compensation (which I consider to be the savings that he gets for not having to build septics for each lot).

But I certainly would not feel obligated.

    Bookmark   September 8, 2007 at 8:12AM
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The neighborhood we lived in a few years ago was a cul-de-sac off of a moderately busy country road. A builder bought an older house on the corner of the country road and cul-de-sac. The frontage to the old house was on the country road. The lot was able to accomodate 2 new houses in the $1.3M range. The side of this lot facing the cul-de-sac had an easement that was owned by the next house down the cul-de-sac. The builder wanted to buy this easement so he could have a cul-de-sac address for the houses, safer driveways and higher prices.

I knew the owners of the easement and the builder. I told the builder that I felt they would not sell easily. Two years later they struck a deal. Basically they named their price and the builder agreed to it. It was about $100K. Was the actual piece of land worth that money? NO. Was it worth that to the builder? Hell YES, it made a big difference to his project and the perceived value of the houses. He got his money back and made a profit.

    Bookmark   September 8, 2007 at 9:53AM
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"He said the only alternative, besides septic, would be >having to pump it up hill through his own personal lot"

I think you should read this sentence over and over. He wants the easement on your property, not his. Why is that? What are his motives for asking you to have this encroachment on your land, when he is able to have it in his and save the hassle of bargaining with you?

My opinion, he knows easements are bad selling points. He wants to build his house and sell in a few years. The easement would kill his land value. His solution? Find the neighbor who will bargain with him. Not matter the price he pays, it wont be enough if it loses you just one possible sale on your home (when the time is right).

I shy away from easements. Basically you are giving a third party (and multiple people at that!) access to your private property. You give them the rights and ability to do whatever they want on your property to fix, amend, tend to the purpose. Do you want to wake up to a 10 foot wide hole in your yard and 80 city employees smoking, chatting, yelling with each other when they trunk the sewer for the new neighbors? Trust me, this will happen. And they wont return the land to the original state. They will fill the hole, throw down some seed and walk away. (Speaking from a past experiences in my previous home- a water runoff easement at the back of our property- we sold and ran away fast)

I think you should think long and hard about what this will mean for you. Be selfish. You do NOT have to agree to this. It is your property. I 100% vote no. Even if he was willing to do a 5mil pay out. Not worth the future hassles!!

    Bookmark   September 8, 2007 at 10:25AM
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Having seen people go thru major problems with an easment I would not consider it at all. This is the builders problem.

    Bookmark   September 8, 2007 at 11:09AM
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I would be real interested in knowing why he wants to use your lot instead of his own. If I were you I would talk to the city, the county, the state and a very experienced real estate attorney.

This guy can pump water to the lots from his lot but wants to pump from you? And is offering you the sky. Something is very fishy.

    Bookmark   September 8, 2007 at 6:15PM
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The builder simply realizes it is more cost effective if he is granted an easement for the sanitary sewer then the construction of a pump house to pump the sewerage thru his property uphill...

    Bookmark   September 8, 2007 at 6:23PM
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He can also offer the poster a decent price for their house and do whatever his heart desires and it wouldn't affect the OP years later. If it was me and I wasn't that attached to the house, that's what I would do.

    Bookmark   September 8, 2007 at 8:59PM
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The local sewer authority may not allow or may frown upon pumping if it is a gravity feed is the case with our local authority....and as such, he may have to pay a very hefty premium for such a set up. In addition, since the sewer authority will most likely own the easement (as is the case with ours in these situations), you may want to contact them directly and ask them exactly what would be involved in order to be fully edcuated on the issue prior to making a decision.

That said, be aware that you may also need the approval of any neighbor that abuts your proeprty...especially if the easement lies outside your building envelope.

Also, realize that sewer lines do indeed need cleanout access (in the form of a manhole)...which would require heavy equipment (trucks, etc) to access the property. It probably won't happen often...but it can...and once again, the disruption will be yours.

Last but not least...1 acre is not very large for such a terms of resale. That said, you may want to consult the appraiser not just on current value for a sale price...but how such use could affect value after the line is in place.

    Bookmark   September 10, 2007 at 3:55PM
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Thanks so much for all the advice. He has not contacted me since the 'meet and greet' so I am just waiting to see what he comes up with. I did hear that he had an engineer here one morning this week while I was at work so maybe he is considering other options.

Will let you know what happens!

    Bookmark   September 10, 2007 at 5:13PM
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We looked at a property for sale that had a large back area that was not fenced in. We wanted to use that area to build a shop but after getting the survey and seeing all the easements criss-crossing the property, we were not pleased. Basically, it was a nice large piece of land that we could do nothing with. We backed out of our offer based on that.

The location of the easement may not bother you, but do keep in mind if it is in a location where a future buyer may want to build something.


    Bookmark   September 10, 2007 at 5:17PM
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The city engineer came out today and staked out the way the sewer line would run. The only way he can do it is through my property. It would start at the edge of the property line and go ten feet in, for approx. 150 feet straight to the street.

One thing in my favor - I have a severely diseased 97 year old oak tree and was planning to have it taken down within the next month. The sewer line would run right through the tree, so he would have to take the tree down. It is huge, and was going to cost me a small fortune.

I spoke with a real estate attorney and he said the formula they use is Value of House divided by Square Feet of Lot multiplied by Square Feet of Easement. He also said that since it would run down the side of my yard it 'probably' wouldn't be an issue to a future buyer.

Thanks again for all your suggestions. We haven't come to an agreement, yet.

    Bookmark   September 12, 2007 at 7:04PM
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If you do it, make it well worth your while. I have easements on 3 sides of my property & hate it! Any time there is a problem, the utility company wants to drive through my yard to get to it.

You probably won't have as much of a problem with sewer, but they do get clogged from time to time.

Also, if there will be grass growing over that area, it might not grow as well there.

    Bookmark   September 12, 2007 at 7:34PM
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