Are You Doing Right By Your Buyer??
Considering the issue of a cesspool when financing is needed
Real estate Debra Walsh tells us about a case where a cesspool is the sewage system. Buyers, sellers and there agents need to understand the possible impact that a cesspool may have on mortgage financing.
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Recently my partner and I have listed a property for sale that has a cesspool instead of a newer septic or municipal sewer. In our area that is not uncommon since certain areas have much older and historic homes. Multiple buyers have loved the home when viewed with their Realtor. When you receive this type of feedback this is exactly what you are looking for as a seller and as a listing agent.
Next of course would be discussion of an offer which has been nipped in the bud because of nervousness over the cesspool and the claim that "FHA doesn't lend for properties with cesspools."
I have never found this to be the case, but wanted to clear this up once and for all, for the seller and for future reference as there are many homes in the Hudson Valley that still have cesspools.
PROPERTY ANALYSIS - SEWAGE SYSTEMS
If sewer systems are not connected to public systems the septic system must meet the requirements of the local health authority with jurisdiction. If the local authority does not have specific requirements, the maximum contaminant levels established by the EPA will apply.
In checking the FHA guidlines there is nothing that says they will not be covered. I went one step further and had a loan officer friend speak directly to underwriting and this is what I was told:
Properties that cannot connect to a public system and are served by an individual sewage system that is acceptable to the local health authority, the system is then acceptable to HUD/FHA. This includes numerous types of sewage systems including cesspools, individual pit privies (out houses), and mound systems. Individual sewage system inspections are only required if there is evidence of system failure, if mandated by state or local jurisdiction, if customary to the area, or at lender's discretion.
In those instances, the appraiser is to condition for an inspection by the local health authority, a licensed sanitarian or an individual determined to be qualified by the DE Underwriter and a certification that the system is operating satisfactorily. If the subject property water source is a well, the cesspool must be 100 feet from the well.
Having said all that, Investors do have their own overlays, and the Investor (not FHA) may choose to not accept a mortgage on a property that is serviced by a cesspool, so your Buyers should check with whom they are getting their mortgage through to make sure that Lender does not have an overlay that would prevent them from doing the mortgage. If that Lender does not allow for properties with a cesspool, then they may have to contact another Lender that does, since FHA will insure properties with cesspools.
In at least one of these cases the Realtor said "I always deal with this lender." If your buyer loves this house I ask again - ARE YOU DOING RIGHT BY YOUR BUYER?
Debra Walsh, GRI, CNE, CHMS, REM | Office (845) 928-8000 | email me
website www.viewhudsonvalleyhomes.com | search for homesIf you are Buying, Selling or Relocating to the Hudson Valley area and need help from a professional REALTOR®, I would be happy to assist you! Please visit my Hudson Valley website for property searches and to sign up for free listing alerts and other information.
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