FHA connection to public water

[EastEndApp]

Is it still an FHA requirement that the subject be connected to public water if it is available? I appraised a house whose sales contract disclosed that the purchaser is to pay for connection to public water. I disclosed this in the appraisal report. Bank came back asking be to remove that comment as is is no longer an FHA requirement that the house be connected to public water. Anyone know if connection to public water is or is not an FHA requirement?

 

[Marty Boone]

Chapter 1
Appraisal and Property Requirements
Page 1-21b
1: General Requirements
A: Refer to the section of this guide titled Utilities Not On, HUD Handbook 4150.2 and Mortgagee Letter 2005-48 to see when connection to a public or community system is required.
B: Individual water supply systems (wells) may be acceptable when the cost to connect to a public or community water system is not reasonable as defined by the lender. 3% or less of the estimated value of the property is the suggested benchmark.C: The lender is responsible for determining if connection is feasible.
D: When required, the lender is to ensure that certifications of water quality and quantity are obtained for proper processing and determination of final acceptability.

Also,
Individual Water Supply and Sewage Systems
Identify the type of utilities in the site section of the appraisal report. When water and sewer are private, well and septic testing is to be governed by state or local requirements; however, the appraiser must note any readily observable deficiencies regarding the well or septic system. The appraiser is also required to report on the availability of connection to public and/or community water/sewer systems. The lender is responsible for the determination of the feasibility for requiring connection.

Is the connection to public water a municipal requirement? Sounds like the seller is covering his assets, check with the local authority.

 

[incognito]

Marty is right on. However, if you see that the hook-up is 3% or less, you should complete tha appraisal subject to..

 

[RSW]

Marty is right on. However, if you see that the hook-up is 3% or less, you should complete tha appraisal subject to..

I would like to see where you got that from.

 

[MEL]

Report an estimate of the cost to connect and let the lender decide as stated here. In most cases the sellers already will have cost estimates in hand. http://portal.HUD.gov/hudportal/HUD?src=/program_offices/housing/sfh/ref/sfh1-21b

 

[incognito]

I would like to see where you got that from.

Fair enough. You should do it as completed, with lender approval. I have never seen one instance where an underwriter overrode the requirement, and I have done a LOT of FHA's where public water has been installed after initial completion of the house, and hook-up was 3% or less...

But yes, RSW, you are correct, it is the underwriters call. I would save myself the trouble and call and have them make a decision, prior to completing the appraisal, as to save yourself from re-writing the appraisal...

 

[Mike Garrett RAA]

Another fine reason...

FHA does not require hook up to public utilities if it isn't economically feasible. Take a $200,000 purchase, is $6,000 economically feasible? Not in my opinion.

 

[MEL]

Another fine reason...

FHA does not require hook up to public utilities if it isn't economically feasible. Take a $200,000 purchase, is $6,000 economically feasible? Not in my opinion.

I knew that reply was coming. lol