Easement Issues

An appraisal for easement purposes involves an easement adversely affecting fee simple title to an insured’s property. The easement was not disclosed to the purchaser (insured) and was discovered by the insured after the purchase. The title insurance policy provides coverage for such an adverse easement, but the title insurance policy did not reveal the easement when issued in connection with the property acquisition. The appraisal date of inspection usually occurs after the date of discovery of the easement so the appraisal is performed on a retrospective basis.

The title insurance company hires an appraiser to estimate the diminution in market value using a before-and-after valuation methodology as of the date of discovery. First, the property is appraised based upon a hypothetical condition as if the easement did not exist, and second, the property is appraised on an As Is basis impacted by the easement. The difference between the first and second market value opinions is the market-value loss or diminution adversely affecting the subject property.

The intended users are the attorney representing the title insurance company and the attorney representing the insured property owner. Expert witness testimony might be required in the event that the parties disagree on the market value diminution. Such testimony is typically provided before an arbitration panel. In this case, Vestor Realty Consultants recommends a summary or possibly a self-contained appraisal report following consultation with the attorney working on behalf of the client.