Septic System Cost and Appraised Value

[abdrury]

Hi all, thanks for making such a great forum available!

Does the cost of installing a septic system on a lot go directly to the appraised value of a new home? i.e., does a purchased $30K lot get appraised for $40K once a $10K septic system is successfully installed and the house is completed?

I'm asking because I'm trying to plan a budget for building a custom home and would like to know how everything should be appraised for our FHA or VA loan-- thanks in advance!

 

[TEL2002]

Typically the appraiser will look at the total package (land, house, land, etc.) and compare these to similar properties in a similar (&/or competing) neighborhood.

Just because you spend $zzz dollars on a repair or installation of something does not mean that the market value of the item is $zzz.

Every market is different. Get with a local appraiser and let them explain how your area works. Be prepared to pay for the consulting time, but it could be well worth your time and money.

 

[Michigan CG]

In my market it is a loss of $10,000 to install the septic system.

Market reactions are local.

 

[Scott R Marshall]

Market reactions are local.

Agreed. The cost of something, while good information for the appraiser to know, can yield more than what it cost, about the same, or less.

On vacant land, in my market, there are differences if the nearest utilities are 1/4 mile+ away, at the lot line or whether some are already present onsite.

The dynamic can change once you begin to build a home on the site, as utilities for a single family residence are required in most cases, and the presence of utilities and the costs associated with installing those utilities, while obviously important, can become a secondary issue in a local market.

People expect a home to have electricity, somewhere their waste goes, and water unless we're dealing with Grizzly Adams. While the source of these utilities can at times have contributory value, the market decides what that amount is, if any.

 

[Mr Rex]

The simple answer is no. In my area there are 2 basic types of septic systems. A gravity system and a pump system, that pumps from one tank uphill to another tank that then is gravity fed. The pumps system cost roughly 2X as much as the gravity fed. In NC the bottom of the drainage ditches in the septic field are designed to be on top of the clay layer, 3 feet to the bottom of the trench. Cross over into VA and the drainage ditches are designed to be below the clay layer and into a sand layer, typically 8-12 feet deep trenches. These systems cost rougly 2X the shallow NC systems. In any case, the septic systems contribute to the value roughly the same as the least costly, regardless of the costs or location.

 

[Terrel L. Shields]

The septic system accrues to the value of the lot imho. It is part of the "site improvements"...sort of intermediate between the land value (bare) and the dwelling. Upon occasion I see a site where a manuf. home was but has been moved off. That site has the septic (and often a well) on the property. That site will typically bring more in my market as it reduces the cost of building anew.

In the cost approach of a new house, the "utilities" may be a bid item and as such often are included in the dwelling costs but otherwise are usually valued "as is" in use with the site improvements (landscaping, driveway, curbing, etc.)

 

[Tom Woolford]

My approach is what is the adequacy of the system. An 800 gal septic tank for a smaller three bedroom house is fine, but if planned improvements are for a four bedroom, three bath house, probably not (experience speaking here). Just because it is there, does not mean its worth anything. The value of an improvement is limited by its utility.