Occasionally, a buyer chooses a property that is not on a municipal water or sewer system. This usually occurs on rural properties but can happen on suburban properties as well. When this occurs, the lender must review the specifics on the water supply and the septic systems to verify that they are acceptable and meet health and safety requirements.
If a property is new construction and the property is going to be using a private well for the water supply, the borrower must supply a certification from the governing authority that the new well meets all applicable standards for a well that is to be used for human consumption. If the property is existing, the appraiser must note that the property utilizes a private well for water and whether the well appears to be adequate for the needs of the property. If the appraiser notes any problems with the system, the lender will require a well inspection an a “PerC” test (Per Coliform Bacteria test). The appraiser in all cases must note whether the use of a private well affects the marketability of the subject property.
Like the well water, if the property is new construction and is slated to use a septic system, then a copy of the approval from the local governing authority should be obtained verifying the system meets all codes. If the property is existing, the appraiser likewise should note whether there appears to be any problems with the system and if so, a septic inspection from a qualified party must be provided. The appraiser must also address whether the septic system would represent any marketability to the subject property.
It should also be noted that if municipal water or septic systems are available, the property must be attached to them. Properties where a septic or private well already exists must be connected up to the municipal systems prior to the closing of the loan. The only exception to this is if the appraiser notes that it is not financially viable for this to be done. The appraiser must in those cases provide the costs of the hook up to the municipal facilities.
Properties which utilize well or septic systems are usually acceptable; however, there are certain conditions that must be met. For more information, contact your Googain Loan Officer for more information.