What would be considered health or safety hazards in a gutted bathroom?

[mpwkeyper]

Some background: I am working through the cash-out refinance process and require a full appraisal. Several lenders have told us that our completely gutted bathroom (biggest reason we are trying to get the loan) would stand in the way of funding the loan, but found a local underwriter that doesn't have a problem with it as long as there are other fully-functioning bathrooms in the house (there are 2 that we have already renovated). As long as the appraiser doesn't note anything as a "health or safety hazard", they will fund the loan.

My question for any experienced appraisers/underwriters/real estate agents is, what would be considered a health or safety hazard in a gutted bathroom? Any examples you've come across that you would consider a hazard?

Thanks for your help!

 

[Scott Kibler]

I am a home inspector as well as an appraiser. Some potential hazards off the top of my head which may or may not pertain to your situation: Exposed electrical wiring, exposure to sewer gases via open drain/waste/vent plumbing, risk of harmful airborne particulate matter from debris (lead based paints, asbestos, whatever), fall or trip hazards due to open floors or walls.

 

[Digger88]

I am a home inspector as well as an appraiser. Some potential hazards off the top of my head which may or may not pertain to your situation: Exposed electrical wiring, exposure to sewer gases via open drain/waste/vent plumbing, risk of harmful airborne particulate matter from debris (lead based paints, asbestos, whatever), fall or trip hazards due to open floors or walls.

yea, i was going to say sewer gasses myself. id make a trip to lowes and buy a sewer drain plug. think it looks like a ball that you stuff in the hole and it pumps up to for a tight seal.

 

[Jambalaya]

If it has a locking door, I would note that the gutted bathroom does not necessarily present a safety issue as the gutted area is blocked off from unauthorized access.

 

[Non Sequitur]

Even if the bath isn't reported as a health/safety hazard, your problem may be the condition rating. If any part of the property is a C5 or C6 (see definitions below), the whole is rated a C5/C6. IMO a gutted bathroom is a at best a C5, possibly a C6. For the most part lenders don't lend on C5 or C6.

C5: The improvements feature obvious deferred maintenance and are in need of some significant repairs. Some building components need repairs, rehabilitation or updating. The functional utility and overall livability is somewhat diminished due to condition, but the dwelling remains usable and functional as a residence.

C6: The improvements have substantial damage or deferred maintenance with deficiencies or defects that are severe enough to affect the safety, soundness or structural integrity of the improvements. The improvements are in need of substantial repairs and rehabilitation, including many or most major components.

 

[Elliott]

I see it as a marketability issue. Virtually every loan is done as a federally related mortgage, so somewhere up the food chain the bath becomes an issue. Appraisers are the eyes of the client (Fannie, FHA, etc). I would make it a required repair, complete the bath, do a final inspection, close the loan. That is by the book, it works, everybody happy. There might be some kind of short cut....but you know what they say about short cuts.

 

[VolcanoLvr]

Other than the home inspector/appraiser, most of the peer responses have missed the obvious: your home has multiple functioning bathrooms, and this one is the only one being renovated.

That to me is not a major serious issue. Yes, it's a 'cost to cure' item that has to be noted and adjusted in an 'AS IS' report, but it should not be a deal breaker (IMHO). I've done numerous appraisals with this situation, and none that I'm aware of have failed to get the loan.

 

[RSW]

I see it as a marketability issue. Virtually every loan is done as a federally related mortgage, so somewhere up the food chain the bath becomes an issue. Appraisers are the eyes of the client (Fannie, FHA, etc). I would make it a required repair, complete the bath, do a final inspection, close the loan. That is by the book, it works, everybody happy. There might be some kind of short cut....but you know what they say about short cuts.

I agree. It sounds like the lender is going to want the appraiser to ignore the gutted bathroom and not even mention it being gutted. I would be willing to bet that the appraiser will get a page full of conditions if he mentions the gutted bathroom. The lender is using the term "health or safety hazard" in order to give the appraiser a hint to not mention the bathroom.

 

[Non Sequitur]

Other than the home inspector/appraiser, most of the peer responses have missed the obvious: your home has multiple functioning bathrooms, and this one is the only one being renovated.

That to me is not a major serious issue. Yes, it's a 'cost to cure' item that has to be noted and adjusted in an 'AS IS' report, but it should not be a deal breaker (IMHO). I've done numerous appraisals with this situation, and none that I'm aware of have failed to get the loan.

The bath is described as completely gutted, not being renovated. So how do you get around the condition rating in an as-is report?

 

[PhysicalDepreciation]

The bath is described as completely gutted, not being renovated. So how do you get around the condition rating in an as-is report?

So you're saying if the entire house was renovated(including 2 other baths), but this one bath is a shell you would classify the overall condition to be C5 or C6? In my market if I were to compare this home to other true C5 or C6 homes the value wouldn't even be close(considering I couldn't find any other similar renovated houses just missing 1 bath). Wouldn't you say your giving that 1 bath way too much contributory value here? I agree with volcano.