FHA Assignment/Commercial Zoning

[goredd]

I received an FHA appraisal assignment from a new client and discovered it is zoned commercial. I have not completed any assignments like this in the past? Is there anything in particular that should be noted in this type of assignment? Is there any reason I should stay away from it? I have also discovered that the property sides to a gas station. Competency is probably an issue and I am not sure the property will meet the minimum standards anyway. Anything else? I would really like to pass on the assignment, but need some sound reasons for doing so. Thanks

 

[Randolph Kinney]

It all starts with HBU. If the current use is allowed by zoning and the HBU is residential, then proceed. But you won't know that until you do the research and analysis.

 

[Proactive]

I would be careful on this one. I have heard it said if it's zoned commercial, the HBU is commercial. Is a residential appraiser qualified to determine HBU on a commercially zoned property? I think not. So, apparently, does my state board.

Next door to a gas station? I wouldn't touch it.

 

[Lee Lansford]

...
I have heard it said if it's zoned commercial, the HBU is commercial.
...

Well, that pretty much takes care of any analysis, doesn't it?

In other words: You heard wrong.

 

[BOCK FOLKEN]

Call - The - Client. Explain the situation. Get their blessing to proceed. You are their eyes and ears.

 

[Proactive]

Well, that pretty much takes care of any analysis, doesn't it?

In other words: You heard wrong.

From a State Board Stipulation and Consent Agreement: "The zoning and highest and best use of the Subject is commercial. Respondent's appraisal was beyond the scope of Respondent's license as licensed residential appraiser." I know the appraiser, and discussed it with him after the sanction was published. This was a (present use) single family residence, zoned commercial.

The OP (and any residential appraiser in a similar situation) needs to ask themselves: "Is a residential appraiser qualified to determine the HBU of a commercially-zoned property?" If the answer is yes, then by all means, proceed with the HBU analysis.

And, most sincerely, good luck with that.

 

[Ca Ar Independent]

Call - The - Client. Explain the situation. Get their blessing to proceed. You are their eyes and ears.

EMAIL the client, have their blessing in writing before proceeding!

 

[The Warrior Monk]

From a State Board Stipulation and Consent Agreement: "The zoning and highest and best use of the Subject is commercial. Respondent's appraisal was beyond the scope of Respondent's license as licensed residential appraiser." I know the appraiser, and discussed it with him after the sanction was published. This was a (present use) single family residence, zoned commercial.

FWIW, what you've posted doesn't have anything to do with the HBU of the property. A commercially zoned property with a single-family residence can, in fact, have a residential highest and best use. Such a property can be appraised by a residential appraiser.

However, it is my recommendation that residential appraisers avoid appraising such properties unless they have a CG supervisor. Problems can arise with appraising these properties, and unless the residential appraiser can is familiar with what these issues are, they can run into a whole lot of trouble. If challenged on the issue, they may be required to explain how it was determined that the HBU of the property is in fact residential. An assumption this is the case won't cut it, nor will the blessing of client.

 

[zdfenton]

Does FHA accept properties zoned for commercial use?

Properties zoned for commercial use are acceptable only if they are predominately residential in nature (no more than 25% of the total floor space can be devoted to nonresidential use) and the use of the property as a residence is legal or legal nonconforming. The appraiser's site analysis must accurately reflect the attitude of the typical purchaser. Predominantly commercial or business locations, or locations subject to noise or other influences adversely affecting the use and enjoyment of the typical owner or occupant should be avoided. The appraiser must address the effect of the applicable zoning ordinances on the value of the property.

Handbook 4150.2, Section 2-1E1
Handbook 4150.1 REV1, Section 12-1D4
Mortgagee Letter 05-48


REFERENCE
Handbook 4150.2, Section 2-1E1; Handbook 4150.1 REV1, Section 12-1D4; Mortgagee Letter 05-48'

 

[Lee Lansford]

From a State Board Stipulation and Consent Agreement: "The zoning and highest and best use of the Subject is commercial. Respondent's appraisal was beyond the scope of Respondent's license as licensed residential appraiser." I know the appraiser, and discussed it with him after the sanction was published. This was a (present use) single family residence, zoned commercial.

The OP (and any residential appraiser in a similar situation) needs to ask themselves: "Is a residential appraiser qualified to determine the HBU of a commercially-zoned property?" If the answer is yes, then by all means, proceed with the HBU analysis.

And, most sincerely, good luck with that.

My luck most be good because I have certainly completed appraisals where the "commercial/business" zoning allowed for SFR and where the h&b use as improved was with the SFR improvements.