09 Feb Real Estate Blog: The Impact of Non Potable Water
It seems once or twice a year, I’ll receive an appraisal assignment that appears to be a typical acreage property assignment. I’ll go through the normal pre inspection research, pull possible comparables, etc. then come to find out when arriving at the property that the subject’s main water source is ditch water. The typical acreage assignment just became much more complex! This recently happened on a property I appraised.
Here are some hopefully helpful questions and steps to follow. 
What is ditch water?
Ditch water is basically a non potable water source. Ditch water was somewhat common in older homes at time of construction in the market area of Auburn and some surrounding areas. Currently, placer county generally requires that all homes with ditch water have bottled water delivered to site.
What is the market reaction?
As an appraiser, the first thing is to search the area for comparables with ditch water. While limited, for the most part, I’ve typically been able to find comparables to demonstrate marketability. At times, I’ve had to go back 2-3 years to review sales. Further, I’ve completed match paired analysis of older sales to see what market reaction there was.
Alongside this, look up the subject in the MLS and see if the subject sold prior. If so, look up competing sales at the time when the subject sold to see what the market reaction was. Most the time, a negative market reaction is demonstrated.
Does the property’s ditch water have private treatment equipment or not?
In my review of homes where the owner has installed water filtration treatment equipment vs. no equipment, homes with treatment equipment generally have a more positive market reaction vs. homes that do not.
Is the property lendable?
Because ditch water is considered Atypical and not common in most homes today, the lending process can present a challenge. While an appraisal report may have comps that support the ditch water, the lender still may have lending concerns. Josh Borba, Broker Associate from www.MLSReverseMortgage.com states, “Even with a good comp, finding a lender willing to fund a loan on a property without potable water may be a difficult task.”
I hope this helps paint a picture of the process and potential challenges of homes with ditch water as the main source of water. While not an impossible process, there are some hoops to jump through. I’d like to hear your experiences if any.
Office: 530-878-1688
Disclaimer: All information deemed reliable but not guaranteed. The information is meant entirely for educational purposes and casual reading only and is NOT intended for any other use. This information is NOT intended to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or other potential real estate or non real estate purpose. This appraiser is NOT a qualified home inspector and any tips are for informative purposes only. If you’d like to obtain and order an appraisal for your specific needs, please contact Bryan at 530-878-1688 for more information.
Gary Kristensen
Posted at 22:33h, 10 FebruaryInteresting Bryan, thank you for sharing. I have not heard the term “ditch water” before. In my area, I’ve never heard the term ditch water, but I have run across occasional sales that did not have potable water. However, for those properties, the cure was just to dig a new well or install filtration or other equipment. However, it sounds like what you’re seeing is that the problem cannot be completely cured or a stigma remains after the cure in your market.
Bryan Lynch
Posted at 15:55h, 16 FebruaryHi Gary, yes, there can be a certain stigma for properties lacking non potable water. Drilling a well is the most likely most cost effective solution as well. Properties that have treatment equipment installed seemingly have a more positive market reaction vs. no equipment. Always great to hear from you!