real estate

Cleaned-up mine could snag FHA mortgage

Steve McLindenQuestionDear Real Estate Adviser,
We're looking at a property next to some land that's been "reclaimed" as part of an EPA Superfund site once contaminated by lead and zinc mining. The actual homebuilding site of about 5 acres isn't affected, but the remaining 15 acres have been reclaimed. Would we have any problems obtaining financing for this site? Our Realtor recalls a situation in a nearby town where buyers of a Superfund site had trouble getting an FHA loan.
-- Angela

AnswerDear Angela,
For clarity's sake, a Superfund site is a property the Environmental Protection Agency says contains hazardous waste and has been designated for cleanup -- or in your case, previously contained pollutants that have already been cleaned up. Under revised rules passed in June 2009, the Federal Housing Administration, or FHA, which guarantees a lender's investment in the event of mortgage default, said it won't issue any more mortgages for homes that are located within 3,000 feet of Superfund sites (or a dump or landfill as well). But in your case, you should be eligible for FHA home-loan financing consideration now that the land next to your site has been remediated and reclaimed.

However, any former contaminated site must still meet local and state remediation standards in order for buyers to qualify for FHA-backed loans. And there may be some apprehension about lending for home construction on or near some former Superfund sites, especially on properties required by the EPA to have long-term monitoring and five-year post-remedy reviews. Some lenders might feel the property hasn't been given the "all clear" until those "follow-up exams" are done.

The EPA recommends that prospective buyers contact their EPA regional office before purchase to discuss any site-related issues. The agency can issue a status letter to prospective purchasers or their lenders to describe cleanup status, future cleanup actions and liability provisions. For a complete list of Superfund sites, data on project status and contact numbers for more specific questions, please visit the EPA's website.

If you do proceed with buying the land, be sure that the adjacent property in question has been issued a "Ready for Reuse Determination" by the EPA. You should add a clause to your purchase contract that gives you an out in the event any on-site environmental issues are encountered on your property or the adjacent property, or if you can't secure financing for any reason.

As an aside, it seems that you have a Realtor who is committed to full disclosure and is obviously looking out for your interests. Request that he or she question the current property owner about the adjacent site's environmental nuances-history or, ideally, question the actual owner of that neighboring property if possible.

Good luck with your land purchase.

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