Bathroom Is Below Grade.

[Neil Melby]

I did an appraisal on a rural residential acreage, the home is a bungalow with one bedroom above egress, the bath is below egress in the full basement, there is an open stairway to the basement.

The lender has tried to sell the loan to secondary markets with no success. They are now asking if the property would qualify for HUD-FHA. I think not, but I do remember that I once rejected a property for HUD as the bedroom and the bath was below grade, at that time there was a HUD office 60 miles away, the lender called HUD and HUD called me and told me to accept the property but adjust for market resistance.

Could this property qualify for HUD, and if so, should I require that a bath be installed on the main level?


Thanks

 

[Ariba]

This is from HUD Handbook 4150.2. You should have a copy if you are doing FHA properties.

HUD Handbook 4150.2

A.   GROSS LIVING AREA
Gross Living Area is the total area of finished, above-grade residential space.  It is calculated by measuring the outside perimeter of the structure and includes only finished, habitable, above-grade living space.  Finished basements and unfinished attic areas are not included in total gross living area.  The appraiser must match the measurement techniques used for the subject to the comparable sales.  It is important to apply this measurement technique and report the building dimensions consistently because failure to do so can impair the quality of the appraisal report.

B.   BASEMENT BEDROOMS, BASEMENT APARTMENTS
As a rule basement space does not count as habitable space.  If the bedroom does not have proper light and ventilation, the room can not be included in the gross living area.  The following requirements apply to the valuation of below-grade rooms:

         The windowsill may not be higher than 44 inches from the floor.

        The windowsill must have a net clear opening (width x height) of at least 24 inches by 36 inches.

        The window should be at ground level; however, compensating factors may allow less.

In all cases, use reasonable care and judgment.  If these standards are not substantially met, the basement area cannot be counted as habitable space.

C.   DESIGN
Design is the cohesive element that blends the structural, functional and decorative elements of a property into a whole.  With good design, the property's parts will be in harmony (each part with all the other parts).  The whole property, in turn, will be in harmony with its immediate site and environment.

Because good design is recognized and desired, the economic life of properties and neighborhoods will be extended and prices will typically exceed those for properties offering the same number of rooms and area but lacking good design.  This competitive advantage usually continues through the entire economic life of the property.

The appraiser must recognize this demonstrable price differential and reflect it in the comparative adjustments of market data and the final finding of value.

I could not find any reference that the bathroom had to be above ground. However, IMHO you must adjust for functional obsolescence.

Ron
AppraiserPlus.com

 

[JSmith43]

Niel, how old is the home? No doubt, if side by side with a rambler with a bathroom next to the bedrooms, I'd prefer the nearby bathroom choice, all else equal. I'm assuming that this is a one of a kind rambler in your area & you might have to extract an adjustment from the market.

In MN, lots of older farm houses would have upper level bedrooms with a main level bath. Some have upper level baths. That would be a possible matched pair to see how much or if the market dings value if they have to run down stairs when they gotta go!

Is there a reasonable way to "cure" the functional problem? The cost to cure plus a little hassle factor should set the upper limit of an obsolescence adjustment, worst case.

 

[Jim Onderisin]

I concur with Ron. There's no HUD requirement I know of that bathrooms be in the upper level. But...have you already scanned the 4150.1 and 4150.2?

 

[Neil Melby]

I have performed FHA appraisals since 1993, and keep a copy of 4150.1 and .2 right next to me. My research shows that HUD is silent on the bath above/below egress issue, which seems to be the concensus with you folks as well. The home was constructed in 1930. There is market resistance to the subject for the bath situation and the one bedroom situation, I was able to find a sale of a schoolhouse (many of these in South Dakota have been converted to single family homes) it had one bath above grade, one bedroom above grade, was able to extract reasonable adjustments for the bedroom/bathroom differences. It would be difficult to solve the functional issues within the contents of the existing walls as the home is only 22 X 24.

 

[Mike Garrett RAA]

Marketability issue. How does your market treat this issue?

 

[Laurie Collins]

..........

 

[Mike Garrett RAA]

I totally disagree. If it is acceptable in the market then compare it to other similar homes. We have bilevel homes in this market with all of the bedrooms below grade and they have gone FHA. Explain, explain, explain.

 

[Laurie Collins]

..........

 

[Ben Vukicevich SRA]

Neil,

Read the Unique Property section of 4150.2 and go with that. I'd say you're good to go, if you don't have to walk through any unfinished basement areas to get to the bath. HUD only requires that you have acceptable sanitary facilities...which can be an outhouse, if they are locally approved.

As far as the above grade/below grade area thing....it's all in how you compare the subject to the comps.

I own an investment property in a condo project that was built new with HUD/FHA approval. The lower units are terraced basement units that are 3' below grade. I fortunately have a walk-out from the living room to grade but the rest of the units in the project have only a 10'x10' walled, below-grade patio accessed via a sliding door from the living room and no access to grade. Exit is from a common interior hallway up 7 steps to a landing then down 7 steps to the parking lot/grade. So technically using the above-grade only living area definition, those units have no Gross Living Area. Hmm...maybe I'll try that approach with the local assessor on a tax appeal...my unit has no GLA so how are you assesssing it??? It doesn't exist.

Just keep your method of comparison consistent and you'll be OK. So in your instance, since you do have above-grade area, there would be no bath listed in the room count on the first and second pages of the URAR. The bath/sanitary facilites would be considered just like an outhouse and valued separately. Yours would be valued under "Finished Basement Rooms."