3. Soil Contamination

a. Septic and Sewage

If a septic system is part of the subject property, the appraiser must determine whether the area is free of conditions that adversely affect the operation of the system. Consider the following:

  • The type of system
  • Topography
  • Depth to ground water
  • Soil permeability
  • The type of soil to a depth several feet below the surface

If in doubt about the operation of sewage disposal systems in the neighborhood, mark "YES " in VC-2, condition the appraisal on further inspection and prepare the appraisal "as-repaired" subject to satisfaction of the condition. The lender will contact the local health authority or a professional to determine the viability of the system.

b. Other Soil Contaminants

The following conditions may indicate unacceptable levels of soil contamination: pools of liquid, pits, ponds, lagoons, stressed vegetation, stained soils or pavement, drums or odors.

  • If there is evidence of hazardous substances in the soil, require further inspection. Mark "YES " in VC-2, condition the appraisal on further inspection and prepare the appraisal "as-repaired" subject to the satisfaction of condition.

c. Underground Storage Tanks

During the site inspection, the appraiser must walk the property and search for readily observable evidence of underground storage tanks. Evidence would include fill pipes, pumps, ventilation caps, etc.

  • If there is evidence of underground storage tanks, require further analysis. Mark "YES " in VC-2, condition the appraisal on that requirement and prepare the appraisal "as-repaired" subject to the satisfaction of the condition.

4. Drainage

The site must be graded to provide positive drainage away from the perimeter walls of the dwelling and to prevent standing water on the site. Signs of inadequate draining include standing water proximate to the structure and no mitigation measures such as gutters or downspouts. For specific instructions about noting this information in the VC form, see VC-3 in the protocol (Appendix D).

  • If drainage is inadequate and needs improvement, mark "YES " in VC-3 make a repair requirement, condition the appraisal on that requirement and prepare the appraisal "as-repaired" subject to the satisfaction of the condition.


5. Water Supply And Sewage Systems

Each living unit must contain the following:

  • Domestic hot water
  • A continuing and sufficient supply of potable water under adequate pressure and of appropriate quality for all household uses
  • Sanitary facilities and a safe method of sewage disposal

Connection must be made to a public water/sewer system or a community water/sewer system, if connection costs to the public or community system are reasonable (3% or less of the estimated value of the property). If connection costs exceed 3% the existing on-site systems will be acceptable provided they are functioning properly and meet the requirements of the local health department.

  • If the correction is feasible, require connection. Mark "YES" in VC-4 condition the appraisal on the requirement and prepare the appraisal "as repaired" subject to the satisfaction of the condition.

a. Individual Water Supply and Sewage Disposal Systems

If water and sewer systems are not connected to public systems, the water well and/or 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 Environmental Protection Agency (EPA) will apply. If the authority is unable to perform the water quality analysis in a timely manner, a private commercial testing laboratory or a licensed sanitary engineer acceptable to the authority may take and test water samples.

  • Each living unit must be provided with a sewage disposal system that is adequate to dispose of all domestic wastes and does not create a nuisance or in any way endanger the public health.
  • Individual pit privies are permitted where such facilities are customary and are the only feasible means of waste disposal and, if they are installed in accordance with the recommendations of the local Department of Health.
  • If there is a well or septic system on the property, mark "YES " in VC4 condition the appraisal on further inspection by the lender and prepare the appraisal "as-repaired" subject to satisfaction of the condition.

A domestic well must be a minimum of 50 feet from a septic tank, 100 feet from the septic tank's drain field and a minimum of 10 feet from any property line.

  • Clearly show the location of private wells and septic systems on the site sketch and note the distance between the two.

b. Unacceptable Conditions

The following water well conditions are unacceptable and must be noted in VC-4:

  • Mechanical chlorinators
  • Water flow that decreases noticeably when simultaneously running water in several plumbing fixtures (the well may not be able to provide a continuous, adequate supply of water)
  • Properties served by dug wells unless a complete survey conducted by an engineer was delivered to the lender and subsequently given to the appraiser
  • Properties served by springs, lakes, rivers or cisterns (3-6)
  • To be considered acceptable, the engineer's survey must include these items:
  • A health report with no qualifications
  • Indication that an inoperative well was cased, sealed and capped with concrete to a depth of at least 20 feet
  • A pump test indicating a flow of at least 3-5 gallons per minute supply for an existing well, and 5 gallons per minute for a new well
  • An acceptable septic report
  • No indication of exposure to environmental contamination, mechanical chlorination or anything else that adversely affects health and safety
  • If these requirements for individual wells or septic tanks are not met, note them in VC-4 and prepare the appraisal "as-repaired" subject to further inspection.

The lender will require the engineer's follow-up report and will arrange for any required corrective measures.

6. Wood Structural Components: Termites

Termites can cause serious problems in the wood structural components of a house and may go undetected for a long period of time. FHA requires maximum assurances that a home is free of any infestation. A pest inspection is always required for:

  • Any structure that is ground level
  • Any structure where the wood touches ground
  • Structures in a geographic area with no active termite infestation may not require a pest inspection. However, the appraiser must always note:
  • Any infestation
  • Any damage resulting from previous infestation
  • Whether damage from infestation has been repaired or is in need of repair

Observe all areas of the property that have potential for termite infestation, including the bottoms of exterior doors and frames, and wood siding in contact with the ground and crawl spaces. Examine mud tunnels running from the ground up the side of the house for possible evidence of termite infestation.

  • If there is any evidence of termite infestation, require an inspection by a reputable licensed termite company. Mark "YES " in VC-5, condition the appraisal on the requirement and prepare the appraisal "as-repaired" subject to the satisfaction of the condition.

For specific instructions on noting this information in the VC Form, see VC-5 in the protocol (Appendix D).

7. Streets

Each property must be provided with safe and adequate pedestrian and vehicular access from a public or private street. Private streets must be protected by permanent recorded easements and have joint maintenance agreements or be owned and maintained by a HOA. All streets must provide all-weather access to all buildings for essential and emergency use, including access for deliveries, service, maintenance and fire equipment. FHA defines all-weather surface as a road surface over which emergency vehicles can pass in all types of weather. Streets must either be:

  • Dedicated to public use and maintenance


  • Retained as private streets protected by permanent recorded easements (when approved by HUD)
  • If these requirements are not met, mark "YES " in VC-6 and prepare the appraisal "as-repaired" subject to the correction of this deficiency.

8. Defective Conditions

A property with defective conditions is unacceptable until the defects or conditions have been remedied and the probability of further damage eliminated. Defective conditions include:

  • Defective construction
  • Poor workmanship
  • Evidence of continuing settlement
  • Excessive dampness
  • Leakage
  • Decay
  • Termites
  • Other readily observable conditions that impair the safety, sanitation or structural soundness of the dwelling

The items outlined in VC-7: Structural Conditions, are meant to alert the appraiser and the lender to the possibility of defective conditions. These items are readily identifiable characteristics that could indicate one of the defective conditions.

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