The Importance of Well Testing in Real Estate Transactions
By Stephen Wiman, PhD
Northern New Mexico is an area known for problem water. More than half of one local company’s sales revenues are derived from the diverse, multi-component water treatment arrays it installs and services on private wells. Although most of these wells are located outside urban areas, there are also well customers in the city of Santa Fe with grandfathered wells (new wells have been prohibited since 1999). It is of critical importance that a company understands how these deals are referred to water treatment companies to resolve treatment issues. Real estate transactions and relationship building with real estate agents are very important.
Do we see a lot of wells going dry because of drought and the presumed lack of aquifer recharge? Actually, not. A much greater recent problem is the increasing number of homeowners who have purchased properties without properly evaluating the water and who subsequently go into sticker shock upon realizing the unbudgeted (and potentially high cost) of treating the water. Another observation is that this problem is more common among newcomers who naturally gravitate toward areas with excellent views and (apparently) favorable real estate values. But some of these attractive and relatively affordable areas are plagued with complex water requiring costly treatment remedies. This fact helps explain the misperception of value. One can haul a lot of water in lieu of a multi-stage treatment array that might cost $40-50K or more (we are seeing more and more potential clients exercising that option).
For real estate buyers who are contemplating the purchase of a property with a private well, it is always recommended to have a well drilling or well service company evaluate the well infrastructure (pressure tank, well casing, power, drain, piping, sediment filtration, cistern, etc.) as well as also determine the pumping rate of the well. (Water treatment specialists can and do check for the presence/absence of sediment filtration; however, not all are licensed to do mechanical well inspections, depend- ing on state regulations.) A low-producing well may necessitate adding a cistern to store water at the surface in order to meet periods of peak demand that exceed the pumping capacity of the well. An atmospheric cistern then necessitates mitigation of bacteriological contamination, most commonly with UV disinfection. And the costs begin to accumulate even before the water chemistry is determined.
The water treatment company enters the equation for water sample collection and lab testing. A drilling company must file a well completion report with the Office of the State Engineer and reporting requirements include the following: location, total depth, general description of the lithologies encountered by depth, the thickness, depth and description of the water- bearing zones, the intervals in which the well was completed and the estimated pump rate. But a comprehensive well test is not required; therefore, it is not uncommon that buyers purchase a property with untested well water chemistry and unknowingly sign up for the potential of some rather costly surprises. (If I were looking for something to do, I would campaign for a state law stipulating that real estate transactions cannot be consummated unless a comprehensive lab test is provided to the buyer by the seller, as required in some states.)
Risk reduction in siting water wells
My primary career background in oil and gas exploration instilled in me an ‘every well is a wildcat’ philosophy. Even with the best available technology, there is often significant risk with respect to quantity and quality of the fluid being sought. When people ask if they should expect the same water their neighbor experiences, the answer is simple: probably not. And what if clients are buying a property where they will need to drill a new well? Again, there is a certain amount of risk in finding water at all. There are some valid geographic generalizations that can be made about what water contaminants might be expected in specific areas. Companies that specialize in treating private well water should be able to help in the screening process. (I am always surprised that local witchers find water for their clients. But their objective is simply discovering water of sufficient quantity and they do not really concern themselves with the potentially high cost of making the water potable or even usable as household working water.)
Water testing requirements and recommended test suite
A wise company policy would dictate not installing whole- house equipment in the absence of a comprehensive lab test that is not more than one-year old. Sometimes clients will bring in old and/or partial water tests. If a recent, comprehensive test cannot be provided, a company should hold firm on this testing requirement, with one possible exception. If the client elects to proceed without the required lab test, then require a signature on a well-worded waiver that states the equipment being provided to the buyer may not be appropriate for the current water chemistry. This waiver usually helps convince the client that new testing is a good idea.
Find a reputable firm that can both interpret the results and recommend treatment options (but only if treatment is war- ranted). With the capability of doing simple testing (hardness, TDS, pH, total iron, silica, etc.) both on-site and in the office, it should only be done as a first-look, courtesy preview for the client. On-site testing is not sufficient for specifying whole-house treatment systems where problem water is anticipated. This policy provides protection for the real estate buyer. In addition, develop a customized and cost-effective, comprehensive water test to send out to a major water testing laboratory. Figure 1 is an illustration of what is included in a recommended test suite.
The test suite is designed to quantify only the constituents known to commonly occur in well water in the local area, rather than everything that might occur across the country. The current cost of this basic test is minimal and it is recommended (but only if warranted) to test for uranium as well as run an HPC (heterotrophic plate count) test. We do not recommend basic presence/ absence bacteria testing for real estate transactions because the concentration at the time of collection (if bacteria are present) must be known to determine the proper treatment. When the cost of the testing is explained to the real estate professional or buyer, in view of the potential post-purchase remediation costs, it is an easy decision.
Confidentiality of test results and equipment function
Test results should be held confidential for the person(s) who commissioned and paid for the test; water test results should not be shared without express, written permission. A motivated seller will usually agree to provide testing to the potential buyer and to explain the function of any water treatment equipment present, even though it may result in a price reduction, rather than risk not getting an offer. Do not provide a list of equipment in a home or disclose the function of the equipment without this same permission of the seller. If a home has water treatment equipment in it and a potential buyer is not presented with the latest available water test report or an explanation of why the equipment is needed, a red flag should be raised. If the seller is not being forthcoming and honest about the water, then what other undisclosed issues may exist?
The role of water testing in real estate transactions
If someone is considering a property with a well, they should engage a real estate professional who appreciates the importance of water in the transaction. Well water, and the often high cost of its remediation, can interfere with or even kill real estate trans- actions. Conscientious and ethical realtors insist on knowing the water quality and their integrity dictates new water testing if current and appropriate testing is not available. A real estate agent should know that is not uncommon for the buyer to ask the seller to pay for the test and provide the results. Honest and skillful interpretation and appropriate remediation recommendations are essential ingredients for success in the transaction. Sometimes water issues actually work to the advantage of the buyer in negotiating a lower sales price to cover the cost of new, additional or replacement treatment systems.
For example, about six months ago, a well- respected real estate team called upon our company to test the water at a high-end property served by a private well. After the test results came back from the lab, we arranged for a site visit to the home. We spent about one-and-a-half hours there, explaining the water chemistry to the owner, measuring and photographing the mechanical room and taking note of every other relevant detail (pipe type and size, square footage served, fixture count, etc.). The meeting went very well. We had no knowledge of the buyer’s identity other than that she was a geologist and was concerned by both the uranium and silica concentrations. The real estate agents assured us that they would convince the buyer that our company could take care of any and all water issues. They were representing both the seller and the buyer, which itself is not a common occurrence. But because we did not hear anything more, we assumed that we had been called in only to help consummate the real estate sale.
More recently, however, a homebuilder with whom we have worked in the past, called us and said that he was ready to install our new system (whole-house nanofiltration) in his client’s new home. We were somewhat baffled at first, especially when the builder disclosed the name of the client because the new owner is well known to us from a previous installation in her current home a few miles away. We learned that the builder had been in the home doing extensive remodeling, starting just after the home was purchased a few weeks after our site visit.
Time, patience and contingency funding
Working on real estate deals requires time and patience and they do not always have such a happy ending. If buyers are looking at properties with wells, we recommend they find a water-savvy realtor and a water treatment company that can recommend and collect the appropriate water test, properly interpret the results and offer several options for remediation. Water treatment risk reduction, by ordering comprehensive lab testing and obtaining cost estimates for remediation (if required) should be implemented before the client is legally committed to purchasing the property. And buyers should make sure that they have the budget to treat the worst-case scenario of water remediation.
About the author
Stephen Wiman, PhD, has a background in earth science and is the owner of Good Water Company, Santa Fe, NM. He is member of the City of Santa Fe’s Water Conservation Committee and he writes a monthly column, Our Water Quality, for the Santa Fe New Mexican HOME Real Estate Guide. He may be reached at (505) 471-9036 and firstname.lastname@example.org
About the company
Good Water Company has been the leader in designing, installing and servicing residential, commercial and industrial water treatment systems in Santa Fe and throughout northern New Mexico since 1988, specializing in problem well water. The locally owned company offers superior products and configures them in multiple-component arrays. The company bases its efforts on integrity, scientific principles and service after the sale. One prominent local real estate broker commented: “Good Water Company makes it possible to live where we want to live.”