A technology that banks use to estimate property boundaries recently survived a court challenge, but it's still generating controversy.
Vizaline, a Madison, Miss., software firm that converts written property descriptions into pictures using satellite images, was recently cleared to operate in its home state. In 2017, the Mississippi Board of Licensure for Professional Engineers and Surveyors sued Vizaline for unlicensed surveying. Vizaline responded by suing the board for violating its First Amendment right to free speech and won in the 5th U.S. Circuit Court of Appeals, arguing that it uses existing information to create the reports. The case was resolved in December.
The Mississippi Bankers Association is glad the legal dispute is resolved, Gordon Fellows, its president and CEO, said in a statement. “Vizaline provides an innovative risk assessment tool that is useful for many Mississippi bankers.”
Several dozen small banks that use Vizaline’s technology say it’s easy to use, more cost-effective than a formal survey and helps catch errors before a real estate loan has closed. The company is expanding from its base in the South, opening the door for more banks to decide if the service is right for them.
The practice has its detractors, who say that Vizaline essentially is practicing unlicensed surveying but that the Mississippi board's definition of surveying is so ambiguous that it’s difficult to prove.
As Vizaline expands into new markets, the software could be particularly appealing to financial institutions that don’t require surveys for loans below certain thresholds, such as $500,000.
Small banks such as First Federal Savings and Loan Association in Aberdeen, Miss., have been loyal customers for years. Dale Tate, CEO of the $47 million-asset First Federal, says he pulls a Vizaline report on every real estate loan he makes.
“Our worst nightmare is if we loan money on a property, they build the house and build it partly on their property and partly on someone else’s,” Tate said.
Banks will submit a “case” through the Vizaline website of a so-called metes and bounds legal property description. (A metes and bounds description traces a property’s boundaries from a starting point to its close and incorporates natural and man-made landmarks, for instance, “Commencing at a Found Iron Pin at the North East Corner of … .”) Vizaline’s software takes this property description and converts that text into a line drawing, which is overlaid on satellite imagery of the area from Google.
The goal is to spot glaring problems right away, so a bank can tell if the property boundaries form a closed shape, that any improvements do not encroach on another landowner’s property (or vice versa), the location of any easements and that the property is relatively located where it should be.
Vizaline says that by reading and interpreting legal descriptions, its product is more thorough and detailed than county tax maps that people can access online for free. With a base cost of $150, the company also says that it is less expensive than a survey. Morgan Miller, special assets manager at the $5.2 billion-asset First Bancshares in Hattiesburg, Miss., estimates that a true survey takes two to three weeks to complete and could cost anywhere from $1,000 to $4,000.
If the software does raise red flags, the bank can decide to hire a professional land surveyor or seek legal advice. Each Vizaline “audit” report carries a disclaimer that it is not a survey.
Vizaline counts 40 banks as customers, ranging from $30 million to $4 billion of assets. The firm currently operates in Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri and Texas, with Ohio in the works. Brent Melton, its CEO, said it aims to extend its reach in the Midwest and to enter Illinois and Indiana, among other states.
Vizaline and its bank clients emphasize that the Viza-Audit reports do not replace a formal survey. Bank executives say they will still require a survey if, for instance, the imagery appears to show a structure sitting on a property boundary or a property line cutting into the adjoining property owner’s house.
“It’s almost like insurance,” said Greg Taylor, CEO of the $120.5 million-asset Merchants & Farmers Bank in Holly Springs, Miss.
Merchants & Farmers uses Vizaline to audit its legal descriptions and close a loan with a confirmed legal description, Taylor said. If there appears to be an error, the bank sends it to an attorney to correct or gets a formal survey.
Miller of First Bancshares requires a Viza-Audit report on all real estate-secured loans, if a survey is not provided at origination, to catch potential ingress or egress issues or encroachments before the loan is closed.
“This is particularly important on the front end to avoid situations where those issues have to be resolved while the loan is in default,” he said.
Before they started using Vizaline, these banks would typically hire a professional surveyor on a case-by-case basis — or just hope for the best. Tate says First Federal would order a survey if there was any uncertainty about the legal description, but “most take several weeks to get done,” he said. “A lot of the time the buyer and seller were not patient enough to wait for that. It slowed down the process of closing a real estate loan.”
Still, the service has its skeptics.
Jeff Lucas, the Alabama division manager at ESP Associates, an engineering design and consulting firm, says Vizaline violates the core issue of surveying. But the official definition outlined by the Mississippi board is too vague, he says, which means Vizaline isn’t technically practicing surveying without a license.
“Surveyors are supposed to be giving an opinion on where property lines are located on the ground,” said Lucas, who is a land surveyor himself. “That’s my main problem with Vizaline — they plot these legal descriptions and do an aerial overlay of where the property is located on the ground. They are making a determination of where property lines are located. But you can’t prove it through the definition.”
He’s unsure whether relying on a Vizaline report could cause legal problems for banks. “What happens if Vizaline doesn’t put the property lines in the correct place? Are they slandering the next door neighbor’s title to their property?” he says.
Vizaline’s clients acknowledge that obtaining legal advice is sometimes necessary.
“It’s a great tool for us as far as being cost-effective,” Miller said. “We fully adhere to their policies that it’s not a true legal survey, more of a geospatial tool you use for legal descriptions. Anytime we order a report and it comes back with issues on the legal description, we go back to the borrower and address the issues.”
Banks also maintain that the speed and convenience more than make up for the cost, which is already a steep discount over a formal survey. The turnaround time for a Viza-Audit report is generally 48 hours, and the price starts at $150 for 30 acres or three parcels of land.
“I don’t have the know-how to do what they are doing,” Tate said. “It doesn’t take the place of a surveyor, but it allows me to figure out quickly if there is an issue with the property, without me spending a lot of resources to make that determination.”
Melton predicts that the demand for his software will intensify in the near future.
“With the moratorium the feds put on banks and mortgage companies to forbear many of their loans, there is a buildup of those loans that are going to have to be dealt with in the future and some of those forbearances will turn into foreclosures,” he said. “It’s better [for banks] to know their legal descriptions are correct now.”