Buying property zoned SF but appraiser calling MF

[Nicole Heasley Beitenman]

Hi BP! I'm under contract for a property zoned SF in Youngstown, Ohio. The home belonged to my grandfather before his passing in 2013, and my uncle sold it in 2014. I'm purchasing it as an owner-occupant with a conventional lone and 5% down.

It's zoned single-family, but the upstairs was converted into an apartment sometime before my grandfather purchased it in 1993. They added an exterior door and steel staircase and installed a tiny kitchenette. I'm trying to buy it with a conventional loan because the seller let it go to hell, and there's no way it'll pass FHA. I also can't put 15% down, which is the amount I'd need for a duplex.

There are no separate utility meters or mailing addresses. You can still access the second floor from the first floor as you would in any normal SFH. There isn't even a lock on the door to the staircase between the first and second floor. The owner has someone staying up there, but there's no lease, so I argue they cannot be called a tenant.

Has anyone dealt with this before? How did you get around it? TIA!

[Joseph J DiFranco]

You may need to go to the local governing authority and describe the specifics of the property to the zoning department or planner.  If you can get them to document the property as a single-family with in law arrangement, versus two units (multi-family), I think the appraiser will take that into consideration.  Its been some time, but when I used to run into this issue for an illegal kitchen, the owner would deconvert the kitchen according to local code.  Maybe your seller is willing to do this, if needed.