Zoning and FHA

[DrDetroit]

I ran into a new (to me) zoning classification and want to get some opinions before I go too far down the appraising path.

The Subject is a smaller home with a zoning designation of CL (Comercial Limited). My first call will be to the city to get clarification as to what CL means (exactly), but what should I be aware of from an FHA standpoint?

I read this from the FHA material;

'The appraiser should consider the effect on the value
of appropriate and well-drawn zoning ordinances. Land-
use controls that receive public approval and are
strictly enforced protect residential sites from
adverse influences that diminish the desirability of
sites. This must be noted on the URAR, and its effect​

must be quantified in the valuation analysis. '

I guess what I am asking you wise old appraisers is what you would do next?

I havn't done ANYTHING with this yet, but it is for one of my favorite clients, so I don't want to keep them waiting too long.

 

[RSW]

I believe they are more interested in knowing if the dwelling can be rebuilt if destroyed more than 50%.

 

[The Warrior Monk]

Speaking in general, if the highest and best use of a property is not residential, it typically doesn't qualify for residential lending programs. The risk of lending on such properties is considered higher, and the interest rates on such loans are higher.

However, I am not familiar with FHA guidelines, so they may have a different policy.

 

[Michigan CG]

I am not an old wise appraiser but I did stay at a Holiday Inn Express last year....

Your zoning is a commercial zoning. 1. Does the zoning allow for the current improvements? 2. If they were to fall down would the current zoning allow the current improvements to be replaced with a similar property? 3. Is the current Highest and Best Use of the property the current use or some other use? 4. Do the current improvements contribute value to the land? 5. If the land were vacant would the land have a different Highest and Best Use?

 

[hglenbetts]

What Tim said....

Do us a favor, and when you find out what "Commercial Limited" is, let us know.

 

[RSW]

That's the point I was trying to make. Is the subject legal in its use and can it be re-built?

 

[DrDetroit]

According to the fine folks at the planning desk, the property can be re-built as a residential unit, as it was built that way originally. CL means (paraphrasing) that the buildings zoned that way can be used as small comercial entities, but cannot be modified in a major way. Thus a small bungalow can become an insurance office or tarot reader parlor, but not a high-rise office building or parking garage. I would love to hear further advice on 'highest and best use'.

 

[Abester]

can it be re-built?

What difference does it make?

 

[Mike Kennedy]

According to the fine folks at the planning desk, the property can be re-built as a residential unit, as it was built that way originally. CL means (paraphrasing) that the buildings zoned that way can be used as small comercial entities, but cannot be modified in a major way. Thus a small bungalow can become an insurance office or tarot reader parlor, but not a high-rise office building or parking garage. I would love to hear further advice on 'highest and best use'.

Suggest obtaining confirmation from the planning department whether the current residential use TRANSFERS on sale or terminates with use of the site converting use of the site to commercial (and/or industrial depending on location and municipality). :icon_idea:

 

[RSW]

What difference does it make?

They will not finance a residential loan for 30 years if it cannot be re-built as a single family residence. Also, you have to look at the H&BU and the remaining economic life of the dwelling.