Zoning problems and Financing - Posted by Jim H

Posted by Randy B on January 27, 2001 at 12:52:09:

Good job Jim,

At this point you must decide what you want to accomplish. If you want to do the repairs and upgrading I suggest getting quotes from local contractors so that you are better armed when you talk to the bank. Trying to change zoning may be a slow process and not currently worth your effort. But if the property still has economic benefit as an apartment I believe a local bank is a good bet. You would want the bank to loan on the “as repaired” value of the property and escrow repair funds to be dispersed as you complete renovations. Good luck, Randy

Zoning problems and Financing - Posted by Jim H

Posted by Jim H on January 24, 2001 at 21:10:32:

I found a great 4 unit. It’s an estate sale with 7 owners represented by a Lawyer. At sometime the property was re-zoned B2 for business. It’s currently Grandfathered as a 4 unit residential. The listing agent told me she has had four deals fall through because of finacing probems related to the zoning. She said that if there was a fire and the building burned over 50%, it can’t be rebuilt as an appartment,(according to the local government). The current owners aren’t willing to go through the hassle of re-zoning. The Lawyer says the property has been priced accordingly. Originally it was priced at $127,900, it is now priced at $99,000. After I get it re-zoned and spend about $10,000 in updates this property should be worth $160,000 or so. Is it possible for me to get this property financed? Please help me solve this problem and get this deal done.

Re: Zoning problems and Financing - Posted by Randy B

Posted by Randy B on January 25, 2001 at 21:58:34:

Jim, I would investigate the zoning ramifications for yourself. I have seen personally, an agent misunderstand zoning applications and incorrectly market a property. Something does sound funny with your situation. In my area, a B2 zoning does not prevent an apartment use. In other words a single-family or multi-housing zoning would prevent a business use, but a business zoning would not prevent a residential use in fact I have seen numerous 4 unit apartments built new on B-2 zoned sites. Again there may be something for your area that I am not aware of. If highest and best use of your property justifies the use as an apartment, you should be able to use bank financing or other non-owner occupied lending sources.

The others you referred to that were not able to get loans may have been trying to get FHA owner-occupied loans and therefore the zoning circumstance was an issue in rejecting the property by loan underwriting. FHA does not want to loan on what might be a business property therefore, the B2 zoning was a red flag to underwriting.

Re: Zoning problems and Financing - Posted by Jim H

Posted by Jim H on January 26, 2001 at 20:42:39:

Randy, Upon doing my “Due Diligence” I contacted the Village zoning office. They said the property was in fact, B1 and not B2. They also advised me that the property was Grandfathered as a legal 3 unit (not a 4 unit as the R/E agent told me.) They went on to say that if the structure burned beyond 50%, it could not be rebuilt as an apartment, only “Limited Retail” use. When I asked if a variance were possible, they said it would be “rare occurance” for that to happen. I got a lot of info from the zoning office, the clerk was very helpful. It seems the village has a lot of property tied up by these local zoning laws. This zoning law is holding down property values big-time. Do you think it might help to go to the neighborhood Banker for a mortgage? Or, maybe find a local attorney with some pull at city Hall. Any ideas?