Does HUD have any water quality testing requirements when a property is connected to a public or community water system?

Public Water Supply System

A Public Water Supply System refers to a system that is owned by a governmental authority or by a utility company that is controlled by a governmental authority.

When a Public Water Supply System is present, the water quality is considered to be safe and potable and to meet the requirements of the health authority with jurisdiction unless:

  • the Appraiser indicates deficiencies with water or notifies the Mortgagee that the water is unsafe; or
  • the health authority with jurisdiction issues a public notice indicating the water is unsafe.

The Appraiser must:

  • report any readily observable or known deficiencies with the water;
  • notify the Mortgagee when water is determined to be unsafe; report and provide a cost to cure; and
  • address any impact on value and marketability, and make the appropriate adjustments.


Community Water System

A Community Water System refers to a central system that is owned, operated and maintained by a private corporation or a nonprofit property owners’ association.

If the Property is on a Community Water System, the Appraiser must note the name of the water company on the appraisal report.

For additional information see:

Handbook 4000.1 II.A.3.a.ii(O)(1) and II.D.3.p.iii – iv available at:

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.

Topic Number: KA-05314