Shared Wells and Loans

Well Inspection

Are you selling a home with a shared well? Are you considering purchasing a home with a shared well? There are loan guidelines to consider when not paying cash. Remember, rules change, so check with your loan officer!

VA Loans

General: Must have a continuous supply of safe and potable water for drinking and other household purposes, and safe method of sewage disposal. Allowed only if not “feasible” to connect to public utilities.

 Must have separate shut-off valves for water and sewage lines

 Cannot pass over, under or through another dwelling

 Must have permanent easement for service and maintenance of well, septic and pipes

 Site must be graded to prevent “ponding” and contamination of water supply

 Must comply with local health authority requirements

 If no local health authority exists, EPA requirements will apply

 Water may also be tested by commercial testing lab by a 3rd part sanitary engineer

 Veteran must sign a statement that they are aware of shared well/septic agreement

 Acceptable “Well-Sharing” Agreement terms:

o Reasonable and fair cost-sharing provisions for maintenance and repairs

o Easement which allows for maintenance and repairs

o Agreement is binding on all parties

o Allows for successors or assigns

o Must be recorded in local deed records

FHA and USDA

General: Shared Well & Septic allowed only if “not economically feasible” to connect to public utilities.

 Existing home – Capable of pumping 3 gallons of water per minute

 New construction – Capable of pumping 5 gallons of water per minute

 Health Department certification – Water is safe to drink

 Shut-off value to individual dwelling

 Cannot service more than 4 dwellings

 Energy for pump must be separately metered

 Acceptable “Well-Sharing” Agreement terms:

o Binding on all dwelling owners, their successors or assignees

o Must be recorded documents

o Allow for testing of water by 3rd parties

o Continuity of water service to all parties

o No additional connections allowed unless agreed to by all parties and does not exceed a maximum of 4 dwellings

o Cannot relocate a septic system with 50 feet (existing) or 100 feet (new construction) of shared well

o Easement must be established for servicing well and water lines

o Allow for emergency situations without approval from other parties

o Allow for equitable costs of repairs or maintenance o Allow for collection of repair or maintenance money from all parties

o Recorded document may not be amended

o Recorded document is legal and binding

Fannie/Freddie

These agencies do not give strong guidance on this topic. Here is really all the say about it in the guides:

 A shared well & septic must meet community standards, be adequate, be in service, and be accepted by area residents

 If public sewer and/or water facilities—those that are supplied and regulated by the local government— are not available, community or private well and septic facilities must be available and utilized by the subject property.

 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, if inhabitants of the subject property have the right to access off-site private facilities and there is an adequate, legally binding agreement for access and maintenance, then off-site private facilities are acceptable.