Commercial Zoned Property

[franksq1]

Client Lives On Main Hwy Property Is Single Family Was Granfathered Due To Area Now Commercial Zoning For Appraisal Lender Is Denying Loan Due To This Saying Fannie And Freddie Guidelines Will Not Allow This Any Insight On This

 

[Randolph Kinney]

What was the appraisal's highest and best use, residential?

What was the remaining economic life? If less than the loan duration, it will be a problem.

Are residential properties being converted to commercial in that zone?

 

[franksq1]

Highest and best use

thanks for the reply yes it states highest and best use is residential but nothing about duration of economic life. and yes all the properties on that road are residential but zoned commercial due to it being on a major route.

 

[Randolph Kinney]

For example, if the mortgage is for 30 years and the remaining economic life as a residential property is 10 years, no lender will commit to that.

This information is found in the cost approach on the Fannie form 1004. Was that portion of the form filled out?

If the house burned down, destroyed, could the house be rebuilt under the current zoning? If not, a lender will not commit to that.

 

[franksq1]

Conventional loan

Economic life is not filled out due to it being a conventional loan. It only allows HUD and VA. This loan is not FHA or VA

 

[Randolph Kinney]

If the house burned down, destroyed, could the house be rebuilt under the current zoning? If not, a lender will not commit to that.

 

[franksq1]

Yes

yes have letter from zoning stating that

 

[Randolph Kinney]

It could be the lender's policy not to make residential loans on properties zoned for commercial.

 

[franksq1]

Lender

lender stated it was because of fannie and freddie guidelines and I could not find it anywhere.

 

[Mountain Man]

If everything around it is commercial, and the zoning is commercial, then the appraiser completely missed the Highest & Best Use by checking residential on a URAR. Bad, bad, bad appraiser... obviously doesn't know what they are doing, or is choosing to ignore the facts.
The fact of the matter is that it's a house on a commercial lot, IE: it has little remaining economic life and will likely be torn down in the near future. If the owner were to move out, it will probably be rented as a hair salon, insurance office, or palm reader until such time as the owner wants to sell or re-develop. Basically, this is a commercial lot loan, and Fannie/Freddie won't touch it.