VA Loan Repair Request

[JenniSam]

What is the name of your state (only U.S. law)? MI

I am selling a home in the city of flint. The water has been tested several times, has never tested positive for lead contamination and some water lines on the street were replaced over the summer.

I am in the process of selling my home to a buyer using a VA loan. Besides 2 minor issues, the inspection went very well. Need to install additional smoke detectors and fix one interior door. The buyers also had their own water test completed and it is our understanding their results were the same as ours and 0% of lead was found. However, we just received the appraisal and they are stating a central water filtration system is required. After doing some research, I found a document titled VA Update on Flint, Michigan Water Contamination.

I pasted the full memo below in case anyone would like to see it in full.

But my focus was on item #3 that states: "Proper mitigation of lead contaminated water must include a central filtering
system which filters all water that could come in contact with the property’s occupants". I read this statement to mean that homes that have contaminated water (tested positive) requires the filtration system. Am I interpreting this incorrectly or does this imply that all homes connected to the city of flint water system requires this regardless of test results. Subsection 3.A makes me think it means all properties regardless of test results.

Looking for some input - Thank you!


It states:

1. Purpose. This Circular provides guidance on the Department of Veterans Affairs’ (VA)
Minimum Property Requirements (MPRs) as a result of the emergency declaration in Genesee
County, Michigan due to water contamination

2. Policy. In accordance with Chapter 12, Section 3 of the VA Lender’s Handbook, each
property which will become the security for a VA-guaranteed loan must have: “A continuing
supply of safe and potable water for drinking and other household uses.” VA considers this to
mean safe and potable water for bathing, showering and sanitary uses. Properties not in
compliance with this MPR will not be eligible for VA guaranty.

3. Action. Proper mitigation of lead contaminated water must include a central filtering
system which filters all water that could come in contact with the property’s occupants. The
central filtration system must be acceptable to the local health authority and when properly
maintained, provide safe, potable water. Information about filtration systems that reduce the
amount of lead in a residential water system can be found here:
http://www.nsf.org/newsroom/consumer-guide-to-nsf-international-certified-lead-filtrationdevices.
Veterans and their families are encouraged to follow the manufacturer’s guidelines for
the maintenance, inspection, and repair of the filtering system.

a. Appraisers must comment and adjust for any market reaction discovered as a result of the
water contamination, as well as any environmental stigma that may be attached to these
properties, as appropriate. Appraisers must note if the subject property is connected to the Flint,
Michigan water district and whether a filtration system is present. If an appraiser indicates that a
property does not meet the MPRs, it must be repaired.

b. Lenders will condition the Notice of Value (NOV) on all properties that are connected to
the Flint, Michigan water district for Water System Acceptability (item 5a), and if the filtration
system is called out for repair (item 10). Certification of the filter system must be completed by
a licensed plumber or local government building/utility inspector. Evidence that the water is safe
and potable must be provided prior to loan guaranty.

c. The lender will also require an acknowledgement stating that the Veteran is aware the
municipal water system is contaminated with lead and that the home contains a central water
filtration system. In order for this to be effective, the system must be inspected and maintained to
include filter replacements per the manufacturers’ recommendations.
d. VA liquidation appraisals will still be conditioned “As Is” and any MPR items should be
noted in the report.

(LOCAL REPRODUCTION AUTHORIZED)


Circular 26-16-8 March 8, 2016

4. Interest Rate Reduction Refinance Loans (IRRRLs). If the lender normally requires an
appraisal due to investor requirements, VA will require a lender to follow the guidelines listed in
Section 3. If an appraisal is not ordered, a water test must show that the property does meet the
MPRs for safe and potable water.

5. Rescission. This Circular is rescinded April 1, 2018.

 

[Zigner]

I'm not sure what input YOU would need on this. The buyer needs to have certain things in place. If those things are not in place, then they won't loan the money.

 

[JenniSam]

I'm not sure what input YOU would need on this. The buyer needs to have certain things in place. If those things are not in place, then they won't loan the money.

Well considering they are expecting me to pay for it and the water tests show no lead, I’m thinking I should provide some input or at least ask for the reasoning behind this requirement.

 

[LdiJ]

I'm not sure what input YOU would need on this. The buyer needs to have certain things in place. If those things are not in place, then they won't loan the money.

Zig...what buyer is going to put money into a home they do not own, before closing on a purchase? The VA isn't going to loan money without a filtration system. Of course they are going to expect the seller to put it in. All purchase agreements have financing as a contingency so the buyer is going to be able to walk if the VA won't lend unless modifications are made to the home.

 

[JenniSam]

Zig...what buyer is going to put money into a home they do not own, before closing on a purchase? The VA isn't going to loan money without a filtration system. Of course they are going to expect the seller to put it in. All purchase agreements have financing as a contingency so the buyer is going to be able to walk if the VA won't lend unless modifications are made to the home.

I wouldn’t think the buyers would do that either. My question was more about asking the appraiser why the filtration system is needed when no lead was found. Both agents are questioning the requirement as well. The buyers agent contacted the appraiser to ask.

 

[JenniSam]

To provide an update on this question:

I was able to obtain an answer by contacting the VA office who sets the guidelines. I spoke with the Quality Control Specialist. He was very helpful and based on my set of circumstances, the water system is not required by the VA.