Help: Best use issues with mixed use zoning residential home

[sputnam]

Just to clarify something for myself. Would a licensed or CR be allowed to make the commercial HBU conclusion?

Sure... but they might not be allowed to appraise the property without getting a Certified General Appraiser to help. If it's market value, the appraiser has to analyze and conclude the Highest and Best Use. To anaylze the Highest and Best Use, you have to know something about the market area, neighborhood, surrounding development, development trends, etc. That is, you don't know the Highest and Best Use until you do the work. Most wouldn't think it was a good idea to do the work and conclude the Highest and Best Use before accepting the assignment. When the Residential Appraiser determines that the HBU is commercial then.... they contact the client to withdreaw from the assignment or to tell the client that you'll get a GA to help out.

 

[Dublin ohio]

When the Residential Appraiser determines that the HBU is commercial then.... they contact the client to withdreaw from the assignment or to tell the client that you'll get a GA to help out.

Which is how I have always looked at it. But this statement by the op makes me wonder.

The buyer just told us that the appraiser told the bank it appraised for the value but considered it’s best use as “commercial.”

 

[Terrel L. Shields]

Would a licensed or CR be allowed to make the commercial HBU conclusion?

Why not? This is more like a home with ADU rather than a real business enterprise.

To the west and south of the house it is all residential .

And that is the cities long-term plans for the area.

The bank may or may not have a commercial department willing to make the loan,

But that is a ARM for 10 years max probably at a much higher interest rate.

When the Residential Appraiser determines that the HBU is commercial then

zoning does not make it a "commercial" assignment. Zoning can impact the obsolescences if the land value is affected. And it is the land that is zoned, not the building. If the rest of that block is residential then the subject is a residence with a special use. Like I said, common here and usually called "R-O" - Residential office. No signage allowed besides your name, etc.

 

[Mark K]

That is, you don't know the Highest and Best Use until you do the work.

I think that in transitional areas, its sometimes necessary to do the work, i.e., appraise as comm and resid, before you can determine the HBU, especially in the instances where the land, if vacant, is worth about the same as the land with residential improvements.

A few small towns in this area are growing quickly and a lot of the older, Main St. types of homes are being razed for commercial use. Vacant site = $200K. SFR = $200K, +/-.

 

[Carnivore]

Fannie Mae would likely securitize this loan, It just depends,....doesn't it always just depends

B4-1.3-04, Site Section of the Appraisal Report (06/04/2025)

This topic contains information on reviewing the Site section of the appraisal report form, including

selling-guide.fanniemae.com

Fannie Mae only purchases or securitizes mortgage loans on properties if the improvements constitute a legal conforming use of the land. However, Fannie Mae will purchase or securitize a mortgage for a property that constitutes a legal, nonconforming use of the land provided that the appraisal analysis reflects any adverse effect that the nonconforming use has on the value and the marketability of the property. This requirement applies to all property types.

 

[Terrel L. Shields]

I am still thinking that the long term planning of the city is to maintain the area as a "traditional neighborhood" and not as an area transitioning to commercial development.

 

[George Hatch]

"appraised for its value" might very well mean there are SFRs in the area in that price range. As I said, the property directly across the street and at the corner just sold earlier in 2023 (1500sf @ $155k) and it has been used as a business - with a sign out front - as well as a residence. Multi-family zoning but an apparently similar mixed use.

As I said, the existing setup appears to conform to the underlying zoning. Depending on the unit size they might be a little short on the onsite parking criteria, or the commercial unit may lack ADA accessibility requirements like a ramp or an accessible style doorway but those are building issues, not zoning issues.

I don't have my finger on the pulse of the GSE policies but it's been my understanding that Fannie will loan on SFRs w/ small office or retail units attached.

From Fannie's Selling Guide:



As far as I can tell from the info available online this property appears to fit the above criteria pretty closely.

 

[Carnivore]

The address provided by the OP was used as a Business at one time

Massage and Body Works it is temporarily closed

Google Maps

Find local businesses, view maps and get driving directions in Google Maps.

www.google.com

 

[Carnivore]

so the issue is for the lender: What happens if the loan defaults? since the Market Value Definition includes Exposure Time. This possibly is the UW's issue of extended exposure time.

https://www.zillow.com/homes/523-Faith-Rd-Salisbury,-NC-28146_rb/75030525_zpid/

 

[Dublin ohio]

zoning does not make it a "commercial" assignment.

But if the appraiser determines HBU is commercial................................