Well.......a problem

[Blue1]

How would you value a property with a well that went dry and no opportunity on the property to sink a viable well? That's the question posed to me by a lawyer who wants me to be an "expert witness."

Apparently the homowner bought the property and then a year and a half later the well went dry. This homeowner now wants to sue the Realtor, Lender and anyone else with deep pockets.

Since there are no comparable sales without a viable well, I appears the only way to value the property is by the Cost Approach. To do this I would estimate the remaining economic life and then subtract the cost of hauling in water to the property. I think by this method, you would come up with a negative value.

Another way is to find land sales......only problem there is that most land has water available.

I don't know if I'm going to do this any suggestions?

 

[Ken in Arkansas]

Why can a new well not be drilled? Low water table, rock, etc.? Have you substantiated this or is this the attorney's conclusion?

 

[Dee Dee]

It would seem to me that if the well was viable at the time of sale, and since the current homeowner bought the home "as is", then he/she wouldn't have a leg to stand on in a lawsuit. Tough luck, for sure.
There are a lot of people around my area who have wells that are going dry, mostly homes built and wells drilled before and during the 70's in the foothills just above Denver. The general opinion is that the growth and water waste (sprinkler systems/golf courses) is causing the water table to drop. Of course, the politicians want to ignore this because it would mean having to stop growth to protect those who are already here. :roll:

 

[David Mullen]

You need to consider the marketability of this property too.

Years ago, I worked for the government and we acquired a similar property through foreclosure.

It was in our inventory for many years and was finally sold for almost nothing because there was no market for it.

I think we finally took the only offer that anyone made for the property.

There will probably be few buyers interested in a property like this where they will have to haul water.

Maybe the land has some other non-residential use that you will find.

 

[Ron in AR]

I would turn and run from this assignment as quickly as possible.

The lawyers will have a field day with anyone that gets on the stand on this one. You don't have to do it, do you?

Just my take on it.

Ron in AR

 

[Neil (Texas)]

Sorry, to burst the bubble Dee, but having a "leg" is not a necessity to file a lawsuit.

As an old attorney told me... "Son, this is about law, not common sense."

:lol:

 

[xmrdfghap]

Unless the tract is too small, and if most properties have viable wells, then there is water there. The new owners may have to redrill the well that is there, or drill another one near by.....either way, water is available. In an area of New Mexico (south west of Anton Chico) they had to go to 620 feet to hit water, but they did hit it.

I believe that if the buyers had the well inspected and/or tested that the well inspectors might be liable, but I do not see how, if the former owners had had adequate water for the time they were in that home, that the sellers can be accused of anything. If, on the other hand, they had prior knowledge of the well going dry, they are (at least in Oklahoma) responsible and will probably have to drill a new well.

Either way, I would suggest the value of the property is less than the original or sales price by the amount of getting a new well drilled. If I were the defense in this suit, I would certainly hire a good water witch and have his findings confirmed by a local engineer.

There are water witches available aren't there?

I am not sure where this would put you, but if you are asked to provide a value estimate on the property absent water, I would do so. The appraisal would include an engineers statement that water is not to be found anywhere on the property and that that certification is why you based your opinion on the lack of water to the property. If the engineer states that water IS available, provide an estimate of value including cost to cure.

You are an apprasier....not a civil engineer or a water witch. You MUST rely on professsionals for information outside your area of expertise. I would charge enough to cover the extra work plus the engineers fees. In addition, I would get the litigation fees in advance. Then defend your value. If the opposition produces an engineer that says water is there, and yours says it isn't, let the engineers argue it....you based your estimate of value on what you deemed to be reliable information.

 

[AC King]

It appears a prudent course of action would be to complete a sales comparison of similar properties with wells, then deduct the cost of deepening the well and the market reaction allocated for the owner's time, energy and frustration.

There are companies that will dig the well deeper for a price. The primary chore appears to be locating adequate drilling companies for estimates.

Good luck and let us know how you handle this one. It is a good example for appraising a definitely unique property.

 

[Blue1]

Good advice Greg, I think I'll ask for certifications as to the lack of water on the parcel. I have only been told that there is no water and that a subsequent (to the sale) effort to drill a well came up dry. However, I didn't think of having it "witched" or having some kind of engineer's certification. Appreciate the help.

Thanks
Bruce M

 

[mrewbs]

This is a no brainer. Appraise the property as if there is a viable well, deduct the cost of a cistern and capitalize the cost of water over a 20 year period. Don't forget many rural properties purchase there water.