FHA & Water Systems in Rio Verde, AZ

[cac777]

While I am a Realtor, we are purchasing our own home in Rio Verde, AZ, but have run into a snag with FHA and the current water systems available in the area.

The home is on a "Joint Well/Water Storage Tank" (according to the Water Agreement with the Title company) and FHA doesn't want to approve either one...first because the "well" is connected to 8 properties, not 4 (though it's not a well at all) and if we call it "hauled water", they don't want to approve it without filing for a waiver, which could takek months and then still not be approved.

I was reading something the other day under FHA Appraisals and "Holding Tanks" that said the following:

Holding Tanks: The use of holding tanks are not considered to be normally acceptable as the sole source of water unless there is no other available source of acceptable water, the use of holding tanks is "typical" for the market area, the dependence of a holding tank does not adversely affect the marketability of the property, there are readily available sources of hauled water to serve the property, fire insurance is available at reasonably affordable rates, tanks are equipped with a clean-out plug at the lowest point and a suitable pressure relief valve, and the tank has a minimum capacity of 500 gallons or larger.

This does definitely apply to this situation, as in this particular area they do not want to dig wells because of the following: 1) Have dug and found no water, 2) Wells often dry up, 3) Water quality is not good.

Does anyone have any idea on getting around these issues with HUD, other than having to file for this waiver (which could take quite a while to get a response).

Someone else told me it really could be the appraiser's call based on what is "typical" for the area...

Our lender has submitted quite a bit of information to the two banks he would sell the loan to to see what they say, but in the meantime....Your thoughts appraisers????

 

[Otis Key]

While I am a Realtor, we are purchasing our own home in Rio Verde, AZ, but have run into a snag with FHA and the current water systems available in the area.

The home is on a "Joint Well/Water Storage Tank" (according to the Water Agreement with the Title company) and FHA doesn't want to approve either one...first because the "well" is connected to 8 properties, not 4 (though it's not a well at all) and if we call it "hauled water", they don't want to approve it without filing for a waiver, which could takek months and then still not be approved.

I was reading something the other day under FHA Appraisals and "Holding Tanks" that said the following:

Holding Tanks: The use of holding tanks are not considered to be normally acceptable as the sole source of water unless there is no other available source of acceptable water, the use of holding tanks is "typical" for the market area, the dependence of a holding tank does not adversely affect the marketability of the property, there are readily available sources of hauled water to serve the property, fire insurance is available at reasonably affordable rates, tanks are equipped with a clean-out plug at the lowest point and a suitable pressure relief valve, and the tank has a minimum capacity of 500 gallons or larger.

This does definitely apply to this situation, as in this particular area they do not want to dig wells because of the following: 1) Have dug and found no water, 2) Wells often dry up, 3) Water quality is not good.

Does anyone have any idea on getting around these issues with HUD, other than having to file for this waiver (which could take quite a while to get a response).

Someone else told me it really could be the appraiser's call based on what is "typical" for the area...

Our lender has submitted quite a bit of information to the two banks he would sell the loan to to see what they say, but in the meantime....Your thoughts appraisers????

Can you clarify "holding tanks"? To us over here in NM that might mean a "cistern" situation. The major cities here pump water from wells the Rio Grande into "holding tanks" so it seems that there might be a lack of understanding on the terminology utilized. That could be the problem completely.

 

[Peacemaker]

The last FHA seminar I attended in AZ, this was discussed, loudly. The FHA folks were very clear - if the water has to be trucked in, the loan isn't going FHA. It's not up to the appraiser - it's up to the FHA direct endorsement underwriter so whoever told you that was mistaken. Also the DEU can override anything the appraiser says, and that can go either way.

They never discussed waivers at the seminar, so I don't know about the possibility there. But I would imagine that Rio Verde probably does suffer in marketability because there are so other areas with competing properties that don't have to haul water.

That area was overbuilt without regard to the long term resources available. It's not going to get better, it's going to get worse. I'd run like Forrest.

 

[cac777]

Thanks to both of you and yes, as the day has moved on it appears FHA will not budge without applying for the waiver and again, that could take a while.

And to answer the first question, no it does not fall under a "cistern". It is a true holding tank with a "well" attached, but again, connected to 8 properties and I know 4 is all FHA allows.

It looks like we'll either move on or apply for the waiver.

Thank you both again!

 

[Old Man]

There seems to be a need for clarification on your part as to what is actually on the property or what actually is the source for water. Is it actually a shared well with 8 properties? Or is it a well that provides water to a shared holding tank? Or is it actually a shared holding tank that is supplied by hauling or having water delivered?

Holding tanks are acceptable in the marketplace in some areas where city water is not available or sinking a well is too costly due to depth, direction, available ground water, or quality. Holding tanks are common is some market areas, as are shared wells.

One of the main problems with holding tanks, shared or private wells, is the lack of data on the MLS stating the water systems or sources on listing sheets and the lack of County Records reflecting this type of information when researching comparables.

 

[Old Man]

I edited my first comment - bad content. My fault, my apology.

I am familar with the Rio Verde area. Here are a couple of links to FHA regarding Water Systems Shared Wells - http://www.HUD.gov/offices/hsg/sfh/ref/sfh1-21c.cfm
and Individual Water Systems - http://www.HUD.gov/offices/hsg/sfh/ref/sfh1-21b.cfm
and Community Water Systems - http://www.HUD.gov/offices/hsg/sfh/ref/sfh1-21a.cfm

You are correct that FHA limits shared wells and/or holding tanks (cisterns) to 4 properties.

This situation may become a problem for selling the property and/or whomever purchases the property, in the future.

 

[cac777]

Thank you to Old Man in AZ...the entire water system does get fuzzy and yes, many agents out there list these homes as "well - shared" on the MLS sheet and then we find out they are really serviced by hauled water companies...so that gets even more frustrating.

I spoke with the owner who is servicing the well/storage tank for this property and he said, "Tell them you have a joint well that is attached to a holding tank", which is also what the Water Agreement from the title company calls it, "Joint Well and/or Water Storage Tank" is the title on the Agreement. It's a pretty long document, but clearly shows there should be 8 properties on this 10,000 gallon tank.

But again, the problem is that the "well/tank" is connected to 8 properties (even though only 5 are currently built out) and FHA allows only 4 properties to be connected.

I think it's very easy to prove that hauled water is "typical" for the area after 150th Street, but finding a lender and/or appraiser who is willing to make note of that has been nearly impossible.

I've called several lenders and they have been running the scenarios by their underwriters and so far all are saying they cannot do hauled water (and none had even heard about the "WAIVER" that the lady from HUD told me about yesterday). So I found that interesting, as well.

There is another lender running it by 3 more underwriters this morning trying to see if they can get some type of "variance" for the area, but we're not holding our breath.

The other issue is that until about 8 months ago, this area never qualified for FHA, as the prices were well out of reach, so everyone has bought via cash and conventional. But now that the area is nearly 75% foreclosures and short sales (all the builders that went under and left these brand new homes just finished or not quite finished), there are many homes now coming down into the FHA price range...so I think FHA needs to take another look.

I asked the HUD rep at what point they will re-evaluate an area and that's when she told me about applying for the waiver, but made it sound like it would still be very difficult to get unless I could prove beyond a shadow of a doubt that there is no way a well could be dug in the area.

We really like the area and that's why we're trying pretty hard to see what we can make work. We're not the best "suburbian" types and like our space and privacy, so it's a great area to us and we plan to be out there for quite some time.

I realize it could become an issue later when trying to sell, but we would most likely put in our own hauled water system and just know that it could only go cash or conventional (which is the case for almost all of them out there right now).

Again, I appreciate all your help.

 

[Old Man]

I think it's very easy to prove that hauled water is "typical" for the area after 150th Street, but finding a lender and/or appraiser who is willing to make note of that has been nearly impossible.

Yes it could be. But that would require proper due diligence and geographic competence on the part of the appraiser, both of which are being flushed down the drain (no pun intended) with the implementation of the HVCC and use of AMCs.

Research of the market area and data from places such as Az Water Resources can provide data such as number of domestic wells in the market area, depths and output. But one would need the Township, Range and Section number in which the subject is located and contend with the automated phone service of the department. Or perhaps on their website one could research data on a specific well under the Wells55 recording data, but one would also need the well number for a specific well.

If I could prove beyond a shadow of a doubt that there is no way a well could be dug in the area.

One could also contact well drillers familiar with the area for the feasability of another well along with the ground water availability of the area from the USGS and any restrictions imposed on the number of wells is a specific area due to ground water availability from the AWR Department. Then again, due diligence and geographic competancy comes into play and you would still be up against FHA for the number of properties sharing.

 

[cac777]

Thanks again for the reply.

We are going to let this one go, as much as we like it, because the bank can't wait long enough for us to file the waiver.

We are going to file for the waiver because we do want to be in this area and it would certainly open some new opportunities for other FHA buyers, so I'm just trying to clarify what I should title the waiver request....well waiver? hauled water waiver?

Thanks again.

 

[narizona]

Thank you to Old Man in AZ...the entire water system does get fuzzy and yes, many agents out there list these homes as "well - shared" on the MLS sheet and then we find out they are really serviced by hauled water companies...so that gets even more frustrating.

I spoke with the owner who is servicing the well/storage tank for this property and he said, "Tell them you have a joint well that is attached to a holding tank", which is also what the Water Agreement from the title company calls it, "Joint Well and/or Water Storage Tank" is the title on the Agreement. It's a pretty long document, but clearly shows there should be 8 properties on this 10,000 gallon tank.

But again, the problem is that the "well/tank" is connected to 8 properties (even though only 5 are currently built out) and FHA allows only 4 properties to be connected.

I think it's very easy to prove that hauled water is "typical" for the area after 150th Street, but finding a lender and/or appraiser who is willing to make note of that has been nearly impossible.

I've called several lenders and they have been running the scenarios by their underwriters and so far all are saying they cannot do hauled water (and none had even heard about the "WAIVER" that the lady from HUD told me about yesterday). So I found that interesting, as well.

There is another lender running it by 3 more underwriters this morning trying to see if they can get some type of "variance" for the area, but we're not holding our breath.

The other issue is that until about 8 months ago, this area never qualified for FHA, as the prices were well out of reach, so everyone has bought via cash and conventional. But now that the area is nearly 75% foreclosures and short sales (all the builders that went under and left these brand new homes just finished or not quite finished), there are many homes now coming down into the FHA price range...so I think FHA needs to take another look.

I asked the HUD rep at what point they will re-evaluate an area and that's when she told me about applying for the waiver, but made it sound like it would still be very difficult to get unless I could prove beyond a shadow of a doubt that there is no way a well could be dug in the area.

We really like the area and that's why we're trying pretty hard to see what we can make work. We're not the best "suburbian" types and like our space and privacy, so it's a great area to us and we plan to be out there for quite some time.

I realize it could become an issue later when trying to sell, but we would most likely put in our own hauled water system and just know that it could only go cash or conventional (which is the case for almost all of them out there right now).

Again, I appreciate all your help.

once you go over 4 properties on a well your consider a water company, and your now under epa gudielines. thats why FHA and many conventional loans are not made on those set ups. you should inform the other realtors about that so they don't mislead people.