Improved Parcel with a Dry Well

[Mark K]

I respectfully disagree with you Mark.

The only way you can "Value" the property is IAW the definition of market value agreed to with the client; in this case I assume the FNMA preprinted definition will apply. That is right from USPAP. The assignment conditions are, I assume, "as is" so you must determine if the water system installed in the house is functioning as intended. If it is not or appears to not be so functioning, you simply condition the value contained in the report on certification by a competent authority that you are willing to hang your hat on that it is functioning as intended. This takes you out of the decision making loop as to the sufficiency of catching rain water and a possible old, malfunctioning well and puts you back in the appraisal business. You also do not have to pretend anything. Such mind games are hard to explain, most often because they have little justification when viewed in the light of the assignment conditions.

I appreciate your method as another way to complete the assignment, but...

As I see it, the "inspection to verify water..." in this case is an unlikely hypothetical condition. I have no problem appraising to HCs that are likely/possible (zoning change, house and 5 acre split, construction of new house) but if the property does not have water on site, the only "as-is" value that I would state in this case is for use as a climate controlled storage facility.

"...you simply condition the value contained in the report on certification by a competent authority that you are willing to hang your hat on that it is functioning as intended."

I've never felt comfortable with this type of condition if I know for a fact (the owner says the well is dry) that the inpsection will reveal what I already know. Maybe that's the way F/F want it but I can't do it. I personally think its misleading but I have the luxury of doing almost NO F/F work. Most of my clients would want actual "as-is" (highest and best use in its current condition) or "subject to" value.

 

[Rich Heyn]

Calculate the annual cost of bringing in water and capitalize it at a reasonable rate. There's your discount.

This is similar to a lake cottage on a small site when the private sewage disposal fails and the county won't allow a new drainfield on the small site. Holding tank is installed, needs to be pumped out periodically.

 

[Mike Boyd]

I have an assignment (conventional refinance) for a property located in a rural property subdivision yesterday that turns out to have a dry well. This is the only water supply to the property. The borrower stated that the well has gone dry periodically over the last two years. If any Tennessee appraisers out there see this, the property is located in Cumberland County, just past the Roane/Cumberland County lines.

The owners are currently collecting rain water in an underground cistern for laundry, etc. You should see what the have contrived...a downspout running from the house gutters at about a 45 degree angle to the cistern 100' from the house. They bring in water for drinking and bathing.

I reported this to the lender who wants to continue with the appraisal. Their instructions? Do your best !

The city (Crab Orchard, TN) plans to run water lines to this subdivision and is in the bidding process now. They hope to have the work completed by late fall. The cost to connect when (and if) this work in completed is low, $750.00for the connection fee plus the cost to run a water to the meter.

I am really not sure how to approach this one. I admit to having not yet looked for a comparable sale with a similar situation. Something tells me this is not going to be easy to find. I have several ideas, none of which I particurly like. Rather than tossing those out for discussion, I wondered if anyone had run across a similar situation and how they handled it.
I'm stumped.

I have one to do on Friday that is similar. Dry well, several attempts to drill a new one, all unsuccessful. Nearby properties have wells that barely produce enough water for one house....not enough to share. It's kinda funny because this community averages around 70 inches of rainfall each year! So, let me know how you intend to do it so I can plagerize you! Mine is not for a lender. The owner wants to know the value for estate purposes.