I'm going to guess there are other flaws that make this a no go for VA loan- any sign of peeling paint, pooling water is going to call for the remedy. Don't accept a VA offer. Is the drain visible that an appraiser/ AND the inspector might not see it? If it is a big white drain above ground then you have a problem with FHA. There isn't anything terrible about greywater in the garden; but if someone writes it up or you put it in the MLS it's going to get called as requiring repair. Take the washer out. Remove the line. Sell the house without a washing machine.

There are many drains that use to waste to water the plants. In fact, City of Berkeley, CA issues permits on it.  I imagine if you have city documentation it is proper it should be OK.

The reality is an appraiser may never know unless it is disclosed or known. You have to by law disclose to buyer, if buyer accepts it, then do you have to disclose to appraiser? There are many rural NH homes that have a set up just like that

If one is allowed to explain it satisfactorily it may have a chance to fly but you are up against government regulations which like banking rules are non-negotiable and who wants to be the one that waives that?  Liability awaits!

If the appraiser can't see it then it won't matter as long as the buyer is ok with it. A trip through a septic tank doesn't do anything sandy soil won't do.

Not sure, but I'd be worried about the drain field if it can't handle the water from the washing machine. If I was seller, i'd run the drain into the septic tank.

I'm going to hope they don't notice it. There is something about that water (now called grey water) that does say it needs to be treated. I'm not sure that is grandfathered.  If it doesn't go in the septic tank then where?

It's a matter of whether or not the appraiser notices.

Case in point, I had a listing with a pool in awful condition a couple years ago and we were worried about the FHA loan being okay with it.  Talked to a lender and he said to make sure the cover didn't look like crap and the appraiser would likely WANT to skip looking into it.  Sure enough, the appraiser saw the pool and turned their back to it immediately and walked around purposely not noticing.  

that's a greywater system..... it saves the main private sewerage system....extends its life.... 

If the appraiser notes it, it will have to be changed.  But grey water doesn't hurt anything in reality.

I doubt the FHA/VA would allow this.  We had a REO home we represented in which we discovered the sewage drain for the home went into a similar hole in the ground - under the driveway!  Fannie Mae had to tear up the driveway, clean up decades of sewage mess, and install a sand filter in order to make the property sellable.  Total cost over $70,000 for the entire cleanup and new septic.  The property sold, I believe, during the recession after cleanup for $130,000.  

Ask Jason E. Gordon he's my VA loan expert. That seems like any appraiser may take issue, as I used do exactly that in one of my homes only to water my large garden and I was made to remedy it when I sold. But, I can't remember if that was appraisal or just buyer negotiating. (17 years ago).

A system in compliance with nature, but not with the govt.  Unfortunate the amount of situations that we see like this.

Parked and Reading.  

I have no clue. 

I'd like to believe that no lender would allow the property to transfer without "proper" draining. 

Let us know what happens, Fred Griffin Tallahassee Real Estate 

I don't really know. 

In my experience, it would be unlikely that the FHA inspection would identify that issue, unless someone pointed it out to him.

Not a problem that I have ever encountered. Very interesting. Love the input from AR folks.

That "flies" in Minot ND Fred Griffin Tallahassee Real Estate . I remember the 1st time I saw a French drain and wondered "what the heck".

FHA & VA don't believe in "fathered in"

I once had a cesspool situation, which normally would not be finance-able by any bank... unless it was "normal" for the area. The home was an older lake cottage, where cesspools were the norm when homes were built there, so I did find a bank that was willing to lend. If your outdoor drain is common in the area, that might save you, but doesn't sound like it.

Fred,

I learned a lot from reading the comments here.  Hope this gets resolved for you in the best way.  A

The building code in our city would not allow that.

Depends...on the inspector.

Regardless if the lender picks up on it, I would request the seller to remedy.

Eve

I've seen greywater discharge handled several different ways Fred. The most memorable one I recall was a PVC pipe sticking through the curb in an old neighborhood that the owner said was for draining the washing machine. Never gave me a satisfactory answer about how it worked in winter. However, I did see it in action in warmer weather, suds and all. 

Caroline Gerardo's solution seems most pragmatic providing proper disclosure is followed.  

Remove the washer/dryer. You are not required to have a washer dryer.

My guess is that it should be fine if it was grandfathered. 

I would also think that an overzealous FHA/VA appraiser could red flag it and cause issues but, ultimately if the government grandfathered it, they cannot make them bring it up to code.