Shared Well

[Beth Ryder]

I have a rural property that shares a well with the adjacent home because they were family members in both homes at one time. Now one property is selling. I disclosed in the report that there is a shared well. The UW is now asking me to comment on if the shared well is typical for the market area and if it affects marketability.
Well, the shared well is NOT common and since it's NOT common, I have no idea if it affects marketability. I have no concrete evidence of that. I would ASSUME that it would affect it...who wants to share your well with your neighbor if you don't like him???
Any ideas on how to answer this question about marketability? I just assumed the lender would require a separate well to be installed.
Hmmmm...

 

[Otis Key]

I would ASSUME that it would affect it...who wants to share your well with your neighbor if you don't like him???
Any ideas on how to answer this question about marketability? I just assumed the lender would require a separate well to be installed.
Hmmmm...

Well, start with replacing the "U" with of and put a hyphen before and after it. And then read it again.

Now, does the two properties have a well share maintenance agreement? Did you make it subject to it having such an agreement drawn up?

If there is a well share, road share, access easement, maintenance share, whatever, the only way to make sure it doesn't influence, impact or have a problem with the property value, that you expressed, is to require that recorded agreement.

How to answer? Well, without knowing your market, where you're located, what is typical and not typical, I can't help you there. I'd suggest that you be honest about it. But you need to be careful how you word it so you don't shoot yourself in the foot.

Good luck with it.

BTW, I didn't mean it as an attack - just a warning that I hope will help you in the long run.

 

[Charley Horse]

I encountered this situation recently… in our market, it is not the norm and it is reasonable to assume a prospective buyer would consider it adverse… particularly given the lack of a written agreement… normally, these situations don’t arise unless it’s two relatives living adjacent to each other.

Lacking specific market data on the impact of a shared well, I took a cost to cure adjustment in both my grid and the CA and explained my reasoning…

 

[hastalavista]

Beth-

An interesting question; I'll store this situation in my memory to hopefully address it "up front" if I ever run across it. So, I appreciate gaining experience on your hard work!

I agree with you. The situation isn't "common" because it isn't readily accepted in the market (unless you have pockets of small "mutual well" arrangements between neighbors in the area? We have such a market, within proximity to a major employment center, so you never know!).

I think the problem is simple to state, but difficult to solve.
If having one's own well is preferable to sharing a well with one's neighbor, how much more is it worth than sharing a well? Or, for this specific case, how much less is the shared well worth vs. having one's own?

Well, its fair to say that the premium or discount is probably no more than the cost of installing a new well (assuming one can be done). And, if the existing well is on my property, then it becomes how much do I need to pay the neighbor for her/him to "get their own". Probably at least half the price, no?
What's a well cost in your area? Here, it can range from $15k+ (and, I mean UP+++).
I think a process like this is a reasonable one to estimate the effect; somewhere between half and all the cost. Since you believe (per your post), there would be some effect, this may provide you a way to give a reasonable and credible estimate.

Good luck!

 

[CANative]

Is your subject property the one with the well or without the well.

If it is the property with the well then it's probably not much of an issue.

If it's the one without the well then there is a lot to think about and a casual C2C might not be the safest thing to do if this is for common, everyday lending. How big is the lot and where is the septic system and drain field and where is the septic and drain field on all of the adjoining lots. Is there a place to drill a well that is far enough away from the septic system and everyone elses septic system? Are there any issues with the local municipality on new permits for water wells in this area?

In my area, shared wells and shared developed spring systems are fairly common. It doesn't affect value. I ask for a copy of the water sharing agreement. If there are none, I make the appraisal subject to the lender doing further investigations for agreements or obtaining agreements.

 

[Doug Wegener]

When I appraised in Southern Oregon I would encounter shared wells. I dont think shared wells are typical of ANY market and I think your UW needs a little educating on this fact. What I used to say is that although they were not typical of the area they were not uncommon which was true.

There definitely needs to be a well agreement/eassement. Usually these agreement will specify the gallons per minute the person sharing the well is entitled to.

Presumably, you have a good producing well and it is not a problem. If the person sharing the well has the right to 5 gom and it is only a 7 gpm well you could see how that could be a problem for somebody.

As long as the well has adequate water to service both properties and there is written agreement guaranteeing the water, then my experience is that it does not impact marketablity or value.

After all, if you have a guaranteed source of water does it really matter if you share the well or if it located on an adjacent property.

 

[Richard Carlsen]

Shared wells are not uncommon in recreational properties here in the north.

Between family members, they make sense. To the general market, however, they are a liability. They are legal and function but the market up here sees sharing a well with a non-family member as being a burden it does not want when buying a house.

Our practice is to consider it functional with a cost to cure of putting down a separate water supply for the house and taking this cost to cure as an addition to the effective age of the house for adjustment in the grid. Usually $3500 to $7500 is appropriate depending where the property is located and how deep the well has to be.

Since shared wells are not illegal, we can never make the report subject to installing a new well. So the report is written "as is" with the market reaction incorporated into the value by using the cost to cure due to functional.

 

[jay trotta]

ditto RC - not uncommon in our area either, smatter of fact I know of a Clondominium project that is served by a few "Common Wells", all the units have turned over several times, doesn't appear to have much "market resistence" here.

actually, I'd rather deal with someone who isn't related - you could put them on notice much easier, than a relative. Relatives, U usually have to take them fer a ride in the trunk, over bumby roads for long periods of time before they git the drift........ROFL

 

[Ray Miller]

Shared wells are not uncommon in recreational properties here in the north.

Between family members, they make sense. To the general market, however, they are a liability. They are legal and function but the market up here sees sharing a well with a non-family member as being a burden it does not want when buying a house.

Our practice is to consider it functional with a cost to cure of putting down a separate water supply for the house and taking this cost to cure as an addition to the effective age of the house for adjustment in the grid. Usually $3500 to $7500 is appropriate depending where the property is located and how deep the well has to be.

Since shared wells are not illegal, we can never make the report subject to installing a new well. So the report is written "as is" with the market reaction incorporated into the value by using the cost to cure due to functional.

Shared wells are common in my area also. Richard has nailed it as to how I handle it.

I have found that most appraisals I review in this rural recreational area never consider the well or septic system as being shared. I have lost track of the number that had shared wells, septic, driveways, fence lines, and the appraiser never took it into consideration.

I have been ask to go to court in a case now, where a borrower bought a small acreage of 80 acres, the appraiser forgot to mention the condition of the fence. This 80 acres sets in a section owned by another person. The 80 is sided on there sides by the other owner. He ask the buyer to share the cost of replacing the fence, so his cattle would not get on there 80. the owner of the 80 refused. The cattle owener as per law, replaced the fence and billed the other owner 1/2 the cost for the shared fence line. The 80 owner refused to pay and hence a law suit for the cost to build the fence. The owner of the 80 has joined the lender and the appraiser to the law suit. As there was no mention in the appraisal of the condition of the old fence and the cost to cure.

As a land owenr of large tracks in several states, I do know that you as an owner in most cases must pay for 1/2 the cost of keeping the fence up.

This is one thing I fear most appraisers never consider when doing rural property. Cost to fence 80 acres is several thousands of dollars if you do it correct.

 

[Jim Onderisin]

I'd agree with both Denis and Richard. Since shared wells are not typical, it would be difficult to extract a basis for an adjustment from market evidence. So you have to base an adjustment on depreciated cost new in your market. I don't see another way. And, as Richard mentioned, this is a functional problem, so don't forget to address it in the cost approach as well as the market comparison analysis.