VA Loan on Single Family Home with Commercial Zoning

[jmcamjr]

No. I have not seen the appraiser's email itself nor have I been copied on it.

Remember I am going just by what the buyer's mortgage originator is telling me. He said, that he did go the VA, called Denver, and was basically told that the VA wouldn't loan on the a single family residence that was commercially zoned.

As I've stated before, there are several FHA mortgages on properties on this street with the same zoning, one of which occurred mere months ago. The selling agent of that property, who I spoke with, said there were no issues with financing. There also is another VA mortgage from 2011 on the home next to that most recent FHA insured property.

As the agent I can't contact the appraiser, and I don't know an appraiser to bounce this off of. I have lurked these forums in the past for information, so I thought I'd reach out for help. The experience and intelligence of the responses in this forum has always impressed me.

Thanks again.

 

[gregb]

Here is what I know, if VA assigns me an appraisal, the appraisal is completed with no way that I know of to decline the appraisal assignment. It may be something I need to research to see if I can decline a VA assignment based on what you state regarding this instance...zoning.

From what you state for the neighborhood, other VA appraisals have been made in the hood, with the same zoning as the subject.

You have several issues floating in this scenario. My advice is not to give up, continue with good attitude and cheer...the VA really does want to do the best for a VET.

 

[jmcamjr]

Thank you Greg, I'm trying to be as cheerful as I can and unfortunately at this point the deal is rescinded based on the all that has transpired. I'm just trying to due my due diligence for my seller and try to determine if this is a REAL issue that is going to run with this property or a faulty decision based on erroneous information.

 

[jmcamjr]

Can anyone give any insight into just the VA loaning on a SFR in a Commercial zone. Rules and regs. that sort of thing?

 

[Hondo]

This is from the Roanoke RLC VA Appraiser Guide Page 41:

3. COMMERCIAL / RESIDENTIAL COMBINATIONS
Reject the property if the commercial use exceeds 25% of the total floor area. Otherwise, describe and analyze the condition. The appraisal report should include zoning information and a description of the use of adjoining properties. Photos should include commercial uses if in immediate area. Indicate both commercial and residential square footage.

If the property is zoned commercial it could exceed the 25% floor area and therefore not be acceptable for VA financing. If I had this assignment, I would call the RLC for guidance.

 

[jmcamjr]

Thanks BuddyKat! That helps! I think I might have read something about that in my searching, but I guess I wasn't sure how another state's guidelines would affect this...

This particular property has no commercial usage. It's 100% residential. However, I am thinking based on your pasted info that the appraiser then included his statement in regards to the commercial zoning, erroneously putting in the 75% rebuild which I'm not sure where he got that info. Hmmm.

Adjoining properties are another single family home and a 4 plex. The appraiser's comments about the 2 adjoining homes "this home and one to the south are the only single family homes in the middle of commercial and apartment buildings." Generally do appraisers, when commenting about multi family, synonymously interchange "apartments" with 4plexes? That comment makes this home sound like Grandma's house in the middle of some busting epi center. This particular block has a bank, the 2 4 plexes, a store front, and 12 single family homes with the bank being on a busy cross street, then parking, then homes.

 

[CANative]

How are you getting a 100% rebuilt letter when the definitions state 75%...?

20.54.070 NONCONFORMING STRUCTURES.
The following provisions shall apply to all structures and buildings meeting the definition
in BMC Section 20.54.040(c):
(a) Continuation: Any legally established nonconforming structure may be
continued until such time that it is discontinued as prescribed in BMC Section 20.54.070(c).
(b) Expansion:
(1) A nonconforming structure may be enlarged, extended or structurally
altered provided the enlargement or alteration complies with the setback,
height, lot coverage, and other site development requirements of the zone
in which the structure is located.
(2) Structures not conforming to the setback may be expanded by up to twenty
percent (20%) of the g.f.a. and to the building line provided the
enlargements do not further violate setback requirements.
(c) Damage or Destruction: A nonconforming structure experiencing substantial
destruction shall be considered discontinued and have its nonconforming status terminated. Any
subsequent repair or reconstruction of the structure shall comply with the requirements of the
zone.
(d) Partial Damage or Destruction: A nonconforming structure suffering from less
than substantial destruction may have its nonconforming status suspended for a time period
determined by the Director and be considered conforming for the purpose of improvements and
repair, if :
4
(1) The structure is damaged by fire or other casualty not intentionally caused
by the owner or tenant and a complete building permit application is filed within one (1) year of
such fire or other casualty; or
(2) A building permit application is submitted prior to partial destruction. The
building permit must remain active and if it is allowed to expire, the legal nonconforming status
shall terminate and subsequent repairs and improvements shall comply with the requirements of
the zone.
(3) In no case shall the nonconformity be allowed to expand.
(e) Repair and Maintenance: Normal repair and maintenance work on a
nonconforming structure may be performed that maintains continued safe and sanitary
conditions.

Definition of Substantial Destruction:

(d) Substantial Destruction: For the purpose of this Chapter, substantial destruction
means the repair or replacement of a building or structure, which exceeds seventy-five percent
(75%) percent of the replacement cost of the entire building, excluding the foundations. The
replacement cost shall be derived from the market value of the structure or the value as defined
by the City’s building code, whichever is greater.

 

[jmcamjr]

It's a non conforming USE not STRUCTURE.

20.54.060 NONCONFORMING USES.
The following provisions shall apply to all uses meeting the definition in BMC 20.54.040(b):
(a) Continuation. Any legally established nonconforming use may be continued until such time that it is discontinued as prescribed in subsection (d) or (e) of this section.
(b) Change of Use. A structure or property containing a nonconforming use may be changed to the following:
(1) A use that conforms to the requirements of the zone; or
(2) Another nonconforming use; provided, that:
(i) A conditional use permit is approved pursuant to BMC 20.58.020;
(ii) The existing nonconforming use was not discontinued as prescribed in subsection (d) or (e) of this section;
(iii) The new use is clearly a reduction in the nonconformity and intensity of the existing nonconforming use; and
(iv) The applicant demonstrates that there is a demand for the use in the neighborhood that provides a public benefit.
(c) Expansion. A nonconforming use may not be expanded or enlarged, except under one (1) of following circumstances:
(1) Alterations are permitted, provided it is within the existing physical space of the building or use.
(2) Residential dwellings may have the building area expanded if the number of dwelling units is not increased above or below the requirements of the zone in which it is located, there is no decrease in the number of off-street parking spaces below the minimum requirements and the addition complies with all zoning requirements.
(3) The acquisition of additional accessory off-street parking is not an expansion of a nonconforming use.
(d) Discontinuation. A nonconforming use that is discontinued shall have its legal nonconforming status terminated and any subsequent use of the property or building shall be that of a use that conforms to the requirements of the zone. A nonconforming use is determined to be discontinued if any of the following circumstances apply:
(1) The nonconforming use is changed to a conforming use;
(2) Another nonconforming use is approved pursuant to subsection (b)(2) of this section; or
(3) The nonconforming use has ceased for a period of more than one (1) year.
(e) Damage or Destruction. If a structure containing a nonconforming use experiences substantial destruction, it shall constitute a discontinuation of the nonconforming use, except the nonconforming use may be allowed to continue under any of the following circumstances:
(1) The structure has suffered substantial destruction as a result of fire or other casualty not intentionally caused by the owner or tenant and a complete building permit application is filed within one (1) year of such fire or other casualty.
(2) The use is a detached or attached single-family dwelling located anywhere in the City.
(3) A conditional use permit was approved pursuant to BMC 20.54.090.
(f) Repair and Maintenance. A building or structure containing a nonconforming use may be repaired and maintained if the work does not restore it from substantial destruction. (Ord. 4950 §8 (Exh. A) (part), 2005)

But this may be where the appraiser is getting confused. Because it's confusing me.

 

[Mike Garrett RAA]

Cite all the building codes you want...the question asked was "will the VA guarantee a loan on a property that has a commercial zoning?". The answer is yes, in most cases. The lender might not want to make the loan based on the appraisers comments.

 

[Don Clark]

Cite all the building codes you want...the question asked was "will the VA guarantee a loan on a property that has a commercial zoning?". The answer is yes, in most cases. The lender might not want to make the loan based on the appraisers comments.

I just completed an appraisal on a property in an I-1 Industrial zoning that is being financed by VA Guarenteed Loan. The property cannot be rebuilt if it is destroyed by more than 50%.

The loan is being guarenteed by VA. So, yes, the loan should work in a Commercial zoning.