Many assume that swimming pools are not permitted under the USDA 502 guarantee program. Even more buyers/agents may not even be aware that pools can be an issue at all, here is some clarification –
First, pools are not a problem with USDA here in Florida, the problem can be the appraised value of the home. What? How? USDA has a rule that requires appraisers to deduct the value of any pool from the overall appraised value of the home. Example –
Home value as is – $200,000
Value of pool alone – $10,000
Appraised value used for qualifying and underwriting – $190,000
Now, this can often times be an issue for USDA buyers because they frequently use increased appraised values to roll in their closing costs ( in the event they are not receiving any concessions from seller) Remember, USDA allows buyers to increase their loan amounts up to the appraised value to cover closing cost and many of them do this. With the pool value being deducted, there may not be any room left for closing costs which can lead to other issues. Keep in mind, most of the USDA home buyers are first time buyers, money is tight. More importantly, because of the pool value being deducted, the appraised value may not even meet the sales price alone.
So, new home buyer using the 100% USDA loan for a home that has a pool? Try to check the value as much as you can in advance and remember the value of the pool will not be included. Also, if you (or your buyer) need assistance with closing costs, it may be a good idea to get sellers concessions for this if possible. By doing this the home only has to appraise at sale price.
PLEASE NOTE – The information above has been updated as of December 2014. USDA Rural Development now INCLUDES all contributory value of swimming pools in the final appraisal report value. USDA now views in ground swimming pools the same as other loan programs.
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