Shared Well

[Brad Ellis]

Marcia,

Yes. If the appraisal is being done on a shared well property and the appraiser does not know, they must so state via the EA. However, for lending purposes, no lender will want to extend credit to a borrower if they have no reasonable assurance that the property can be sold after foreclosure as a habitable dwelling.

That will assume water is available.

Everyone keeps saying that this is the lender's responsibility alone. I say no- the appraiser must know what the relevant characteristics of the property are. It is required within the SOW. So, either insisting or demanding this data- and if it is legally recorded it should be on the prelim title is appropriate, in my view. That dos not relieve the lender of their responsibilities, but I see nothing different here than would be required for proposed construction in terms of what the appraiser needs/should have.

When the appraiser discovers the shared well, it probably changes the SOW. Remember that as we find out more about our subject the SOW can and will sometimes change.

What I am seeing here is the old "easy way out" again. Could the appraisal be done with EAs and HCs? Of course. Is that what your client wants? No- not if the data is available.

If there is a chance that the other owner would cut off water after foreclosure, then everyone- appraiser included- should know if a new well could be drilled, hook up to public water is available, etc.

I still want to know what is wrong with insisting upon seeing the legal document certifying a legal agreement in place for the water?

Brad

 

[CANative]

We need to CB4 shared well properties if we're not supplied with the proper documentation. So says Fannie...

XI, 404.03: Utilities (06/30/02)

For a mortgage to be eligible for purchase or securitization, the utilities of the property must meet community standards and be adequate, in service, and accepted generally by area residents. If public sewer and/or water facilities—those that are supplied and regulated by the local government—are not available, then community or private well and septic facilities must be available and utilized by the subject property. If community facilities are used, the owners of the subject property must have the right to access those facilities, which must be viable on an ongoing basis. Generally, private well or septic facilities must be located on the subject site. However, off-site private facilities are acceptable if the inhabitants of the subject property have the right to access them and if there is an adequate, legally binding agreement for their access and maintenance.

If there is market resistance to an area because of environmental hazards or any other conditions that affect well, septic, or public water facilities, the appraiser must comment on the effect of the hazards on the marketability and value of the subject property (as discussed in Section 307).

 

[Mike Dzurick]

I would leave the well test to the discretion of the lender......

 

[Marcia Langley]

OK, so EA it is. In that case, it becomes a "minimum property standard" rather than purely a market adjustment issue.