You can sell a house with an encroachment, and people do it all the time. The sale is legal, title can usually still be insured, and buyers will close on properties where a fence, driveway, shed, or part of a building crosses a boundary line. What changes is the preparation: you need a current boundary survey, a written disclosure, and in most cases either a recorded encroachment agreement with the neighbor or a fix before the property hits the market. How much work the sale takes depends on the size of the overlap and the type of loan your buyer plans to use.
Minor Overlaps vs. Major Encroachments
Not every encroachment is the same problem. A fence that drifts six inches past the line is a different animal from a garage sitting three feet onto your neighbor’s land. Courts have consistently held that minor issues like a fence a few inches over the boundary don’t make a title unmarketable, as long as the buyer knows and agrees to proceed. Major encroachments involving permanent structures are the ones that trigger title objections, lender rejections, and real price cuts.
Marketable title is the standard a buyer’s lender cares about: a title a reasonable, informed buyer would accept without fear of future litigation. An encroachment is an encumbrance, so it shows up on the title report. Whether it stops your sale depends on what kind of encumbrance it is and whether you’ve papered it properly.
Start With a Boundary Survey
Before you list, hire a licensed land surveyor for a current boundary survey. This is the step everything else depends on. The survey shows the exact location of every structure relative to your legal lines, and it becomes the factual basis for your disclosure, your title insurance application, and any agreement you negotiate with your neighbor.
A boundary survey for a standard residential lot typically runs between $1,200 and $5,500, depending on size and terrain. Wooded or hilly parcels cost more because of the fieldwork. Properties with old or missing survey markers also drive the price up because the surveyor has to do more research. An outdated or inaccurate survey can trigger title objections during underwriting and delay closing by weeks, so this is not the place to save money.
Once the survey is in hand, you’ll know whether your structure encroaches onto your neighbor’s land, their structure encroaches onto yours, or both. That answer drives every decision that follows.
Ways to Clear the Encroachment Before Listing
You don’t have to resolve an encroachment before selling, but doing so removes the biggest friction point for buyers and their lenders. The main options, from simplest to most involved:
- Remove or relocate the encroaching structure. If it’s a fence, shed, or landscaping, moving it onto the correct side of the line is the cleanest fix.
- Negotiate a written encroachment agreement with your neighbor. The agreement acknowledges the encroachment, grants permission for the structure to remain, and typically covers maintenance, indemnification, and what happens on a future sale. A real estate attorney drafts it, and you record it with the county so it binds future owners of both parcels.
- Pursue a boundary line adjustment, sometimes called a lot line adjustment. You and your neighbor agree to redraw the property boundary so the encroaching structure sits entirely on one parcel. A surveyor prepares new legal descriptions, and the adjustment goes through your local planning or land services department for approval. Both owners have to consent.
- Sell as-is. Disclose the encroachment, price accordingly, and let the buyer decide. This works best with cash buyers or investors who don’t need lender approval, and worst with FHA buyers.
The encroachment agreement is the most common middle path. It doesn’t require tearing anything down or moving property lines, and most title companies will accept a recorded agreement as enough to issue a policy. Getting your neighbor to sign one before you list spares you from scrambling in escrow.
How Encroachments Affect Title Insurance
When the title company reviews your survey and sees an encroachment, it typically lists the encroachment as a numbered exception in the preliminary title report. An exception means the insurer won’t cover losses or legal disputes from that specific issue. For a minor overlap backed by a recorded encroachment agreement, the exception is usually acceptable to the buyer and the lender. For a major structural encroachment with no agreement, the exception can kill the deal.
Buyers and lenders can request an ALTA 9 series endorsement for extra coverage. The ALTA 9.1-06 endorsement, for example, insures the owner against loss from encroachments by improvements on neighboring property onto the land, unless the specific encroachment is expressly excluded in the policy schedule.1Florida Office of Insurance Regulation. ALTA 9.1-06 Endorsement – Restrictions, Encroachments, Minerals These endorsements cost extra and aren’t always available, but they’re a standard tool for getting lenders comfortable with a known encroachment.
Without acceptable title insurance, most mortgage lenders will refuse to fund the loan. If the title company won’t insure around the encroachment, the sale stalls until the issue is resolved or the buyer switches to cash.
FHA and Conventional Lender Rules
This is where sales fall apart. FHA loans carry strict property standards the home has to meet before closing. HUD Handbook 4000.1 requires that the dwelling, garage, and other improvements on the subject property not encroach onto adjacent property, a right-of-way, a utility easement, or a building restriction line, and the same rule applies in reverse: neighboring structures cannot encroach onto the subject property.2U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1
Fences are the exception. Fence encroachments in either direction are acceptable as long as they don’t affect the property’s marketability.2U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1 If any part of a garage, shed, or building crosses the line, the FHA appraiser will flag it, and the lender will require correction before closing. Correction in practice means removing the encroaching portion or getting a boundary line adjustment that eliminates the overlap.
Conventional loans are more flexible. Most conventional lenders will accept title exceptions for minor encroachments that don’t touch any improvement on the subject property and don’t interfere with its use and enjoyment. But every lender has its own overlays, so there’s no guarantee a conventional loan will sail through either. If you have a known structural encroachment, expect the buyer pool to narrow, especially among first-time buyers who are more likely to use FHA financing.
What You Have to Disclose
Nearly every state requires sellers to provide a written disclosure covering known defects and conditions affecting the property. If you know about an encroachment, you must disclose it. Describe the nature of the encroachment, its location, whether a formal agreement with the neighbor exists, and whether any dispute is ongoing. Most state disclosure forms include a specific section for boundary issues or shared structures.
Skipping the disclosure is one of the most expensive mistakes a seller can make. A buyer who finds an undisclosed encroachment after closing can sue for misrepresentation, seek rescission, or pursue damages. Courts tend to side with buyers in these cases, particularly when the seller had a survey and chose not to share the results. The statute of limitations varies by state, but buyers typically have several years from the date they discover the issue to file suit.
Early disclosure also protects you. A buyer who learns about the encroachment from your form and then proceeds to closing has a much harder time suing later. The disclosure becomes evidence of an informed decision.
What Encroachments Do to Your Sale Price
Buyers who find an encroachment during due diligence almost always ask for a price reduction, and the size of that reduction tracks the severity of the problem. A minor fence overlap with a recorded agreement in place might not move the needle at all. A structural encroachment that limits the buyer’s financing options or creates uncertainty about future disputes can reduce offers by several thousand dollars or more.
The negotiation also shifts because encroachments shrink your buyer pool. Cash buyers and experienced investors are less bothered because they don’t need lender approval and they understand the risk. Conventional and FHA buyers, who make up the bulk of the residential market, are more skittish. Fewer competing offers means less leverage for you. Sellers who resolve encroachments before listing, or who have a clean recorded agreement on file, tend to get closer to asking because they’ve removed the uncertainty that drives aggressive discounting.
When the Neighbor Won’t Cooperate
The ideal scenario is a neighbor who signs an encroachment agreement or consents to a boundary line adjustment. When that doesn’t happen, you have a harder path.
If the encroachment has existed for many years without objection, two doctrines may already be in play. Adverse possession allows someone who openly occupies another person’s land for a long enough period, continuous, open, hostile, actual, and exclusive, to eventually claim ownership of that strip. The required time ranges from as few as five years to as many as twenty, with many states in the seven-to-ten-year range. A prescriptive easement is similar but grants only a right to use, not ownership, and the use doesn’t need to be exclusive. A neighbor who has driven across a corner of your property to reach their driveway for a decade may have acquired the right to keep doing so. Both doctrines matter because they represent claims that may not appear in the deed or title records, and buyers’ title companies will want them resolved.
If informal resolution fails, a property owner can file suit seeking a mandatory injunction ordering removal of the encroaching structure. Courts have the power to grant that relief, but they also have discretion to award money damages instead when removal would be disproportionately expensive. Many states also recognize an equitable easement, which allows the encroachment to remain permanently if three conditions are met: the encroachment was innocent rather than willful, the owner won’t suffer irreparable harm from leaving it in place, and removing it would cause the encroacher a hardship greatly disproportionate to the harm the owner experiences. An encroacher who built deliberately or negligently won’t qualify.
A quiet title action is another option, especially when the real question is who owns the strip of land under the encroachment. These lawsuits can settle the boundary once and for all. Uncontested cases still run $1,500 to $5,000 in legal fees, and contested cases cost significantly more. Simple disputes sometimes settle in a few months; complex ones can take a year or longer.
Recording at Closing
Once the buyer accepts the encroachment and the title company and lender sign off, closing looks like any other real estate transaction with one addition. The escrow agent bundles any signed encroachment agreement or boundary line adjustment with the deed and records everything with the county clerk or recorder’s office. Recording creates a public record that runs with the land, so future owners of both parcels are bound by the agreement.
Recording fees vary by jurisdiction but typically run between $10 and $100 for the first page, with small per-page charges after that. Compared to the survey and legal fees involved in getting here, those costs are minor. The recorded agreement stays attached to both properties permanently, so neither your buyer nor the neighbor’s future buyer will face the same uncertainty again.