We often get asked about “non-conforming” properties, such as residential properties in areas that are zoned commercial, or multiple units on one lot with ambiguous zoning.
Residential lenders will not lend against properties that have commercial use. They will, however, lend against non-conforming properties (properties that are not typical for the area), as long as:
(1) The appraiser can find comps and does not comment about adverse marketability issues;
(2) We can get a letter from the zoning authority (city or county) that says the residential use is allowed; and
(3) We can get a “burn letter” or a letter from the zoning authority that states that the property can be rebuilt in its current use. This is often an issue. Current non-conforming uses are often allowed or “grandfathered” in, but such uses often cannot be reconstructed if a fire destroys the property. Lenders will not lend unless they know their collateral can be rebuilt if a fire (or other disasters) occurs.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646