Can You Sell a Property With an Encroachment?

Selling a property can become complicated when boundary issues arise, and encroachments are one of the most common challenges homeowners face. Some sellers are aware of an encroachment early on, while others discover it later during a survey, inspection, or title review, sometimes near the end of the selling process. This often raises questions about legality, property value, financing, and buyer confidence. Naturally, you might wonder: can you sell a property with an encroachment?

The answer is yes, an encroachment doesn’t automatically prevent a sale, but it can influence pricing, limit the pool of potential buyers, and affect how smoothly the transaction proceeds. This comprehensive guide walks you through what encroachments are, the legal implications of selling a property with one, how buyers and lenders respond, and the practical steps to sell successfully, whether you decide to resolve the issue first or sell the property as-is.

What Is Encroachment in Real Estate?

An encroachment in real estate occurs when a structure, improvement, or use extends beyond a property’s legal boundary and onto neighboring private property or public land. Encroachments can involve buildings, fences, driveways, utilities, or landscaping and are often discovered during a professional land survey, title search, or property inspection.

Encroachments may be intentional or accidental and can involve either your property crossing into a neighbor’s land or a neighboring structure encroaching onto yours. The impact of an encroachment depends on its size, permanence, and legal status, ranging from minor issues with little effect on value to serious boundary disputes that affect ownership rights, financing, and the ability to sell the property.

Common Examples of Encroachments

Some of the most common property encroachments include:

• Fences built beyond the property line
• Driveways crossing onto a neighbor’s land
• Sheds, garages, or portions of a home extending over a boundary
• Roof overhangs, balconies, or decks crossing legal limits
• Tree branches or roots extending onto neighboring property
• Utility lines or drainage systems installed without proper easements

Minor encroachments are often longstanding and undisputed, while major encroachments can create legal and financial challenges.

Is It Legal to Sell a Property With an Encroachment?

Yes, it is legal to sell a property with an encroachment in most jurisdictions. There are no laws that prohibit selling a home solely because it has a boundary encroachment. However, sellers are legally required to disclose any known encroachments to potential buyers, as they are considered material facts that can affect ownership rights, property value, and financing.

The primary legal risk comes from failing to disclose the encroachment. If a buyer discovers the issue after closing, they may have grounds to cancel the contract, seek financial damages, or pursue legal action. As long as the encroachment is disclosed honestly, documented properly, and reflected in the sale price or contract terms, selling a property with an encroachment is both legal and common.

How Encroachments Affect Property Value

Encroachments can affect property value by increasing legal risk, limiting buyer demand, and complicating financing, which often leads to a lower sale price. The extent of the impact depends on the size, location, and permanence of the encroachment, as well as whether it has been legally addressed. Minor encroachments, such as a fence slightly crossing a property line, may have little to no effect on value, especially if there is no active dispute and the issue has existed for many years.

More serious encroachments, such as a garage, addition, or portion of the home built on a neighboring property, can significantly reduce marketability. Buyers may factor in potential legal costs, removal expenses, or future disputes, and lenders may restrict financing until the issue is resolved. As a result, properties with unresolved encroachments often sell at a discount compared to similar homes without boundary issues, particularly when the encroachment limits financing options or creates uncertainty about long-term ownership rights.

Will Buyers and Lenders Accept a Property With an Encroachment?

Acceptance of a property with an encroachment varies depending on the severity of the issue and the type of buyer or lender involved.

Buyer Perspective

Many traditional buyers are hesitant to purchase properties with encroachments due to potential legal disputes, uncertainty about boundaries, and possible future costs. However, real estate investors and cash buyers are often more willing to buy encumbered properties, especially if the price reflects the encroachment and all documentation is provided upfront. Transparency and proper disclosure can help reassure buyers and reduce negotiation obstacles.

Lender Perspective

Mortgage lenders are generally more cautious. Significant encroachments can:

• Delay loan approval
• Require legal resolution before closing
• Trigger title insurance exceptions
• Result in loan denial

Minor encroachments may be acceptable if they do not affect property use or value, but major boundary issues often push buyers toward cash purchases, as lenders typically require clear title and defined property boundaries before financing.

Do You Need to Fix an Encroachment Before Selling?

You are not always required to fix an encroachment before selling, but resolving it can increase buyer confidence, expand the pool of potential buyers, and potentially improve the sale price.

Common ways to address encroachments include:

• Boundary Agreement: A written agreement with the neighbor acknowledging the encroachment.
• Easement: Legal permission allowing continued use of the encroached area.
• Lot Line Adjustment: Officially changing the property boundaries.
• Removal: Relocating or demolishing the encroaching structure
• Quiet Title Action: A legal process to clarify ownership rights.

Each option varies in cost, time, and complexity. Sellers should weigh the benefits of resolving the encroachment against potential delays and expenses. In many cases, especially for minor encroachments, full disclosure and selling as-is can be a practical alternative.

How to Sell a Property With an Encroachment

Step 1: Confirm the Encroachment

The first step in selling a property with a potential encroachment is to confirm whether an encroachment physically exists and determine its exact location and dimensions. This step focuses solely on identifying boundary lines and any structures or improvements that extend beyond them.

Encroachments are most often identified through a professional land survey or physical inspection. Confirming the encroachment allows you to understand the scope of the issue before addressing any legal or title implications.

How to Confirm an Encroachment:

• Hire a licensed surveyor: A professional survey establishes legal property boundaries and identifies any structures, fences, or improvements that cross those lines.
• Examine survey markers and measurements: Review boundary markers, setback lines, and distances shown on the survey to understand the extent of the encroachment.
• Document the findings: Obtain a stamped survey or written report showing the encroachment’s location and size.

Accurately confirming the encroachment provides a factual foundation for disclosure, pricing, and next steps, without addressing legal rights or ownership issues yet.

Step 2: Review Title and Legal Documents

Once the encroachment has been physically confirmed, the next step is to analyze its legal significance. This step focuses on ownership rights, legal permissions, and potential risks, not physical boundaries.

Key Actions:

• Review the title report: Identify recorded easements, covenants, restrictions, or title exceptions that may relate to the encroachment.
• Examine the deed and legal description: Confirm how the property is legally defined and whether the encroachment affects ownership or transferability.
• Investigate recorded agreements: Look for existing boundary agreements, licenses, or easements that may legally allow the encroachment to remain.
• Consult a real estate attorney: An attorney can explain legal exposure, disclosure requirements, and options for resolution or selling as-is.

Reviewing these documents clarifies whether the encroachment is permitted, disputed, or unresolved, allowing you to accurately manage buyer expectations and reduce legal risk during the sale.

Step 3: Decide Whether to Resolve or Sell As-Is

After confirming the encroachment and reviewing its legal implications, the next step is to decide whether to resolve the issue before selling or sell the property as-is with full disclosure. The right choice depends on cost, timing, market conditions, and your target buyer.

Option 1: Resolve the Encroachment Before Selling

Resolving the encroachment before listing the property can reduce legal uncertainty, improve buyer confidence, and expand financing options. This approach is best for sellers who want to sell through traditional methods, such as listing with a real estate agent and appealing to owner-occupant buyers, while also aiming to achieve a higher sale price.

By addressing the encroachment in advance, the property can be presented with clear boundaries and fewer legal or title-related risks. This often makes the home more attractive to mortgage lenders and cautious buyers who may otherwise hesitate or require price concessions due to uncertainty.

Although resolving an encroachment may require additional time, legal work, or cooperation from neighboring property owners, it often results in a smoother transaction and stronger offers. For sellers prioritizing marketability, financing approval, and maximum value, resolving the encroachment before selling can be the most effective strategy.

When this option makes sense:

• The encroachment involves a primary structure (home, garage, or addition)
• Mortgage financing is desired but may be difficult or restricted
• The cost and time required to resolve the encroachment are high relative to the expected increase in sale price

Option 2: Sell the Property As-Is

Selling the property as-is means listing and transferring ownership with the encroachment unresolved, while fully disclosing the issue to potential buyers. This approach is often best for sellers who prioritize speed, simplicity, or minimizing upfront costs, especially when resolving the encroachment would be expensive, time-consuming, or legally complex.

An as-is sale typically appeals to cash buyers, real estate investors, or developers who are comfortable assuming boundary-related risks and factoring potential resolution costs into their offers. While this strategy may limit the buyer pool and reduce financing options, it allows sellers to avoid delays and proceed with a quicker, more predictable closing.

Although selling as-is usually results in a lower sale price compared to resolving the encroachment beforehand, it reduces stress, eliminates the need for legal or construction work, and lowers the risk of the transaction falling apart. For sellers seeking a fast exit or a low-effort sale, selling the property as-is can be an efficient and practical solution.

When this option makes sense:

• The encroachment is minor, longstanding, or unlikely to be challenged
• The cost or time required to resolve the encroachment outweighs the potential increase in sale price
• Speed, simplicity, or certainty of sale is a priority

Step 4: Disclose Transparently

Full and accurate disclosure is essential when selling a property with an encroachment. Encroachments are considered material facts because they can affect ownership rights, property value, financing, and future use. Transparent disclosure protects the seller from legal liability and allows buyers to make informed decisions.

Key elements of proper disclosure include:

• Clearly describe the encroachment: Identify what is encroaching, where it is located, and how far it extends beyond the legal boundary.
• Provide supporting documentation: Include recent land surveys, title reports, plats, and any written agreements or easements related to the encroachment.
• Explain the legal status: Disclose whether the encroachment has been addressed through an easement, boundary agreement, or court action, or if it remains unresolved.
• Outline potential risks or limitations: Inform buyers of possible disputes, use restrictions, or financing challenges that could arise due to the encroachment.

Proper disclosure should be made in the seller’s disclosure statement and reinforced in the purchase contract. Being upfront builds buyer trust, reduces renegotiations, and minimizes the risk of post-closing disputes or legal claims.

Step 5: Price the Property Accordingly

Accurately pricing a property with an encroachment is essential to attract buyers while reflecting the potential risks and costs associated with the issue. Proper pricing helps prevent long listing periods, failed negotiations, or last-minute price reductions.

Factors to Consider When Pricing:

1. Severity of the Encroachment: Minor encroachments, like a fence slightly over the property line, may have minimal impact, whereas major structures crossing boundaries can significantly reduce value.
2. Cost to Resolve the Issue: Factor in potential legal fees, removal or relocation costs, and any boundary agreements or easements required.
3. Market Conditions: Compare your property to similar homes in the area, adjusting for the encroachment’s impact on desirability.
4. Buyer Pool Limitations: Recognize that mortgage lenders may restrict financing, so your buyers may primarily be cash buyers or investors.

Tip: Consult a real estate agent experienced with encroached or encumbered properties, or consider a professional appraisal to ensure your price is competitive and justified.

Step 6: Target the Right Buyers

Selling a property with an encroachment requires marketing it to buyers who understand and are willing to accept the associated risks. Targeting the right audience increases the chances of a faster sale and minimizes complications during the transaction.

Ideal Buyers for Encroached Properties:

1. Cash Buyers: They can bypass lender restrictions, close quickly, and are often comfortable assuming legal or boundary risks.
2. Real Estate Investors: Investors are familiar with distressed or encumbered properties and can factor resolution costs into their offers.
3. Developers: In some cases, developers may purchase the property for redevelopment, especially if the encroachment does not affect overall land use.
4. Neighboring Property Owners: Occasionally, neighbors may be interested in resolving the encroachment by purchasing the encroached area or negotiating an agreement.

Marketing Tips: Highlight the property’s underlying value, such as location, lot size, or development potential.

Step 7: Close the Deal

Closing a property sale with an encroachment requires careful attention to legal, financial, and disclosure details to ensure a smooth transaction. Proper preparation protects both the seller and the buyer and helps prevent post-sale disputes.

Key Steps to Close Successfully:

1. Review Offers Carefully: Evaluate buyer qualifications, contingencies, and financing methods. Cash buyers or investors often offer faster and more certain closings.
2. Finalize Documentation: Ensure all surveys, disclosure forms, boundary agreements, and any legal resolutions are included in the contract. Full transparency is critical.
3. Coordinate with Professionals: Work with a real estate attorney, title company, or agent familiar with encroachments to handle contracts, title transfers, and closing statements.
4. Address Title Issues: Resolve any title exceptions related to the encroachment, or provide documentation that informs the buyer of potential risks.
5. Conduct a Final Walkthrough: Allow the buyer to inspect the property and confirm its condition before closing.

By following these steps, sellers can transfer ownership confidently, mitigate legal risks, and ensure the sale is completed efficiently, even with an encroachment present.

Benefits of Selling As-Is to a Cash Buyer

Selling a property with an encroachment as-is to a cash buyer offers several advantages, especially when resolving the issue is costly or time-consuming:

• No Repairs or Legal Resolutions Needed: Cash buyers are willing to purchase the property in its current condition, even with encroachments, eliminating upfront expenses.
• Faster Closing: Without lender requirements or financing delays, cash transactions can close in days or weeks.
• Reduced Risk of Deal Falling Through: Fewer contingencies and no mortgage approval requirements mean a smoother, more predictable sale.
• Lower Stress and Effort: Selling as-is simplifies the process, reducing negotiations, inspections, and paperwork related to fixing the encroachment.
• Financial Certainty: Cash offers provide immediate liquidity and a guaranteed sale price, making it an ideal option for sellers prioritizing speed and simplicity.

This approach is particularly effective for homeowners seeking a quick, low-risk exit from a property with boundary or encroachment issues.

Can Title Insurance Cover Encroachments?

Title insurance generally does not cover known or visible encroachments. Standard policies protect against defects in title, such as unknown liens or ownership disputes, but typically exclude boundary issues or structures that cross property lines.

Encroachments may be covered if they were unknown and not discoverable from public records at the time the policy was issued, or if a specific endorsement for boundary coverage is added. Even then, known encroachments or those shown on surveys are usually excluded, and future disputes are rarely covered.

Lenders often require clear boundaries or endorsements before approving financing. Providing surveys, easements, or boundary agreements can reduce title objections. Sellers must disclose encroachments to avoid legal liability, as title insurance alone does not protect against disputes arising from undisclosed boundary issues.

Conclusion

Selling a property with an encroachment is entirely feasible when approached with transparency, planning, and the right strategy. Confirming the encroachment through a professional survey and reviewing legal documents helps homeowners clearly understand the scope of the issue. Deciding whether to resolve the encroachment or sell the property as-is, fully disclosing the situation to potential buyers, and pricing the home appropriately all contribute to a smooth and efficient sale.

For homeowners who prefer to avoid the time, cost, and uncertainty of resolving boundary issues, selling directly to a cash buyer can be an effective alternative. Manuel Capital is a trusted cash home buyer in Chattanooga, Tennessee, that purchases houses in any condition, including properties with encroachments. By eliminating repair negotiations, inspection delays, and lender-related complications, Manuel Capital offers a faster, simpler, and low-risk selling experience. With no fees or commissions, we provide straightforward cash offers that allow you to move forward with confidence. Contact us today to get a fair cash offer and sell your home hassle-free.

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