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FHA - Question On Unfinished Bathroom Remodel

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DeeRod

Freshman Member
Joined
Aug 5, 2017
Professional Status
Real Estate Agent or Broker
State
Texas
I have a client who wants to go ahead and sell their home and they have a secondary bathroom that they demoed but decided to not finish it. They have all of the materials in the restroom (tile, shower components, etc), however whoever buys it will need to basically put everything together. I am fairly new at RE and was wondering if this would be a problem if we received an offer from an FHA buyer.
 

DonRico

Senior Member
Joined
Nov 26, 2002
Professional Status
Certified General Appraiser
State
South Carolina
I wish Sellers wouldn't do this.
Why would you want to take a Listing with a pile of rubble for a 2nd bathroom ?? How are you planning to Market this house -- as a 1 bath ? 2 bath ? Handyman Special ?? The Seller can't scrape up a few thousand bucks to have the 2nd Bath Finished Professionally ?? That would put the house in a whole other Price Point.

Looking at it from a potential Buyer's perspective.....I would wonder what else is "unfinished" in the house. So would any Appraiser or Home Inspector

I don't know about FHA Financing. But ask your Seller if they want to spend $3000 to make an extra $10K on the Sale ??.
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
FHA requires it to be completed and so do most conventional lenders on purchase loans - BUT like post #2 stated spend $3K to make another $10K also gives the buyers less reason to come in with low ball offers.
 

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California
I am fairly new at RE and was wondering if this would be a problem if we received an offer from an FHA buyer.

First, I congratulate you on reaching out to see how the property's condition might impact an FHA appraisal.

I believe that for an FHA appraisal, the bathroom would need to be brought back to full functionality before the loan could be funded. In the case you describe, the easiest way to do that is to complete the renovation with all the product on-hand.
There may be some traditional lenders who would loan, as-is, based on the work-in-progress. But if this is a one-bathroom house, the odds of a traditional lender loaning on it is very low. You'd have to get a non-traditional (hard money) lender.

If FHA buyers are prevalent in your market for the home-segment you buy and sell within, I highly suggest that you continue to dig deeper into the FHA property requirements. An FHA-knowledgeable agent can really make the difference for both their buyers and sellers. Knowing what FHA requires will allow you to suggest to the parties what likely will and won't work as far as property condition and FHA.

Good luck!
 
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Elliott

Elite Member
Joined
Apr 23, 2002
Professional Status
Certified General Appraiser
State
Oregon
I see a unfinished bathroom as a health and safety and marketing issue. Finish the bath.

I've been in houses that didn't finish the bath and ten years later the bath is still unfinished.
 
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