FHA Assignment/Commercial Zoning

[The Warrior Monk]

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.

It should be noted that the in the license law of many states, this clearly falls outside of the scope of practice of a residential credential. If the state follows the AQB's scope of practice strictly, it only includes properties whose HBU is 1-4 family residential. A property with 75% residential use and 25% doesn't fit this criteria.

 

[Proactive]

It should be noted that the in the license law of many states, this clearly falls outside of the scope of practice of a residential credential. If the state follows the AQB's scope of practice strictly, it only includes properties whose HBU is 1-4 family residential. A property with 75% residential use and 25% doesn't fit this criteria.

This, I believe, is the position of the states I practice in (Idaho and Washington). The OP from Hawaii asked for some sound reasons to pass on the particular assignment he/she posted about. I think we've given some good ones.

 

[RSW]

I had a situation much like the OPs a few months ago. The subject was a SFR property but was zoned commercial. My H&B U analysis indicated the current use was as residential. But, I had to look at the remaining economic life of the dwelling as being residential or commercial. I spoke with a few CGs and the zoning department and it was agreed that the H&BU would not remain as residential for the next 30 years. I sent maps, photos, and zoning info to the lender. They did not want me to continue this as an FHA assignment.

 

[Smokey Bear]

I would really like to pass on the assignment, but need some sound reasons for doing so.

You've got it, zoned commercial, above your pay grade. (above your license level, for those who haven't found their brains yet this Monday morning.)

 

[ramrcdk]

RSW, Clear explanation. Sound Advice. Thanks for your input. I have the very same type assignment. OR had...
Mine perhaps...even more obvious as same was sold by an Investor to an...Investor who uses it for a slum type rental...and for future... Commercial Interest. Owner Investor says naw...it's a SFR house cause I want to REFI for cheap $$$ and FHA loan. I will not be responsible and can make better use of my time/fee.

 

[Joyce Potts]

Just because it's zoned commercial does not automatically make it feasibly the highest and best use. There are lots of SFR on busy roads that have been re-zoned. Many will need to be assembled with adjacent properties to meet lot size, lot coverage ratios, parking, ingress/egress etc. There is such a thing as interim use. Again, hypothetical conditions and extraordinary assumptions are often invaluable in these circumstances.

 

[ramrcdk]

Just because it's zoned commercial does not automatically make it feasibly the highest and best use. There are lots of SFR on busy roads that have been re-zoned. Many will need to be assembled with adjacent properties to meet lot size, lot coverage ratios, parking, ingress/egress etc. There is such a thing as interim use. Again, hypothetical conditions and extraordinary assumptions are often invaluable in these circumstances.

Yes Joyce, Of course. However by description of the OP situation and yours, the very first thing is to not assume the "ordered" Form or the Scope of Work is "correct". Perhaps for a "holding their breath investor borrower" or "the ignorant...just do it lender" BUT not for correct procedure. H&B would obviously play a major roll in determining the Scope. My case specific, I know what I know when a Walmart is just down the street from "this" property and commercial is rolling that way, the property has more wrong that right, not a 203, etc. Also, for me F&R Fee would have been x2 or x3 the offer for the extensive and complex assignment IF I could even comply. Just because I can doesn't mean...I should (case specific). I enjoy the insight, thanks!

 

[Mike Garrett RAA]

In years past I have done many properties that were zoned commercial but the highest and best use was..."as improved" which was residential. What is the probability of this property being used for commercial purposes? Would there be a market for the site if vacant?