Shortages In Area Coverage: What It Is and Why You Need It

By
Real Estate Agent with United Real Estate TX #0552717

In Texas, our 1-4 Family Residential Contract includes the option for "survey coverage" in Paragraph 6(A) Title Policy and Survey, on Page 1.

 

"...Seller shall furnish to buyer ... an owner policy of title insurance (Title Policy) ... in the amount of the Sales Price, dated at or after closing, insuring Buyer against loss under the provisions of the Title Policy, subject to the promulgated exclusions (including existing building and zoning ordinances) and the following exceptions

{1 through 7 and 9 not included for brevity}

8) The standard printed exception as to discrepancies, conflicts, shortages in area or boundary lines, encroachments or protrusions, or overlapping improvements:

¤ (i)  will not be amended or deleted from the title policy; or 

¤ (ii) will be amended to read "shortages in area" at the expense of the
 ¤ Buyer ¤ Seller"

 

Without coverage, the policy does not protect against title defects that would be shown by an accurate survey, such as:

  • improvements that encroach into an easement or protrude over a boundary or setback line
  • fences that are not on the boundary line
  • surveyor errors in locating boundary lines or improvements
  • an adjoining landowner's improvements that encroach into the buyer's property

 

When the buyer does get Survey Coverage, the title policy gives the buyer protection because the survey exception is removed from the policy - except for "shortages in area." This is because the title company does not calculate the number of square feet in the property.

 

So why is the  phrase "shortages in area" not deleted from the general exception? The policy does not insure the number of square feet of land contained in the property. The title company insures the location of boundary lines but does not calculate or insure the amount of area within the boundaries. That calculation comes from the surveyor.

 

If the buyer wants the coverage for shortages in area, the typical cost is 5% of the owner title policy premium.   On a home with a sales price of $300,000 the title policy costs $1,886 and the shortages in area cost is $94.30. Whether the buyer or the seller pays for this is negotiable.

 

Should you get coverage for shortages in area when buying your home? If the acreage is important to you, if you anticipate any discrepancies in the measurements, or just for peace of mind, then get the coverage. It's a small price to pay for your very large purchase. And maybe you can get the seller to pay for it.

Posted by

Lorrie Semler, e-PRO, GRI, SRES, CPRES, CRS
Addison Resident/Addison Specialist                                                      Subscribe Button
Real Service. Real Results. Real Estate.
United Real Estate
972-416-3417

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Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Hi Lorrie- what a good explanation of shortages in area coverage. I'll bet that many buyers and others may not be fully aware of what this is. 

bananatude

Jan 29, 2020 02:08 PM #1
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