In the lending world, there is often a fear of private roads when in fact, not all private roads are treated the same. Each of the traditional loan guidelines have varying guidelines which I’ve outlined below.
FHA defines access to the subject property as “adequate vehicular access to property refers to an all-weather road surface over which emergency and typical passenger vehicles can pass at all times.”
The Appraiser is required to address the following in their report:
- Identify whether there is safe pedestrian access and adequate vehicular access to the site and any impact on value or marketability
- Must report on whether there is a permanent easement
- Must both ask and report on whether a maintenance agreement exists as well as commenting on the condition of the private road or lane.
Shared driveways that are not part of an HOA must also meet the above requirements.
VA requires that each property must be provided a safe and adequate pedestrian or vehicular access from a public or private street and that private roads must meet the following:
- Be protected by a permanent easement and
- Maintained by a HOA or joint maintenance agreement
- Must have an all-weather surface
USDA requires evidence that that the private road or common-use driveway is protected by a recorded permanent easement or recorded right-of-way from the property to the public road and that a provision exists for its continued maintenance. Or is owned and maintained by an HOA.
CONVENTIONAL guidelines vary between Fannie and Freddie so as long as the Lender you are working with underwrites to both you are fine! If they don’t and there is not a private road maintenance agreement, you’ll want to find a Lender that does underwrite to Freddie Mac. I think anymore it’s more common that a Lender will underwrite to either.
Fannie Mae does require an adequate, legally enforceable agreement or covenant addressing the maintenance of the street. The agreement needs to include the following and be recorded with the County:
- Identify who is responsible for payment of repairs, including each party’s representative share of the expense
- Identify what are the default remedies in the event a party fails to comply with their payment obligations
- Identify that the agreement is perpetual and binding on both current and all future owners
Freddie Mac does not require a separate road maintenance agreement; however, the property must have “legally” appropriate ingress and egress, meaning there is a recorded easement describing the road and the road’s location as well as the following:
- Must be maintained in a manner that generally meets community standards
- Comparable sales should have street maintenance similar to the subject property and if not similar, adjustments must be made with an explanation of the differences as well as the marketability of the property must be addressed by the Appraiser
Questions? Give me a call at 360-459-1200!