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No water in the swimming pool? No loan!” says FHA

This transaction is in the final stages and the seller is Freddie Mac (bank owned single family detached house). All inspections have been completed, appraised value is in, and by all appearances, we were good to go ~ until we received a letter from the buyer’s lender. Here are the key parts of the letter:
“The purpose of this letter is to address the empty pool at [referenced] property. The buyers have applied and been approved for an FHA loan in order to purchase the property. The credit approval part of this process has been finalized and is complete.
To obtain full and final approval and successfully close this transaction we need to obtain property approval. Upon reviewing the appraisal it came to our attention that the pool is currently empty. According to FHA guidelines, the pool must contain enough water to allow the pool’s pump to successfully circulate the water. The pool’s current state will not allow us to move forward on this transaction at this point.
In order to approve the property, the pool must be filled with water to meet the above mentioned criteria for a period of time long enough for the appraiser to re-inspect the pool. This is for 2 reasons. The first is to ensure that the pools systems are functioning. The second is that to ensure that the pool can hold water to avoid any safety issues.”


At this late stage in escrow, the questions raised by this letter are numerous and potentially devastating:

1. Who is going to pay for the water to fill the pool?
2. Is the FHA appraiser qualified to determine if the pool equipment is functioning properly?
3. Who is going to pay for repairs to the pool equipment if it is not functioning properly?
4. What are the implications for the seller if they refuse to cooperate with the pool filling and/or repairs?
Personally, I’m in favor of dropping a water hose in the pool, filling it up and calling the appraiser back to re-inspect as quickly as possible. But the “what if” questions come into play, so who knows what will happen!
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