I'm in the process of purchasing a property that I just found out was turned into a duplex when it's zoned for SFR. (So it's a nonconforming structure) It's in Yuma, AZ. It's a BRRRR, so I need to cash out refi after the reno. I talked to a lender, who said they didn't really care what it was zoned for, they would lend. Does anyone have any experience with this type of issue? I won't need to pull permits for the reno, it's cosmetic. Also, if I back out, I lose $2,500 of earnest money.

The ARV of the duplex we're thinking is 160-170k(for rooms/sq ft), where SFR comps are 155-165k(for rooms/sq ft)? Will an appraiser look at it differently? Thanks!

I'm sorry I don't have experience with zoning, but I live in Yuma and am interested to follow this and see what people say. 

@Adrian Alfaro @Joshua Isaac Pruett  any experience with zoning?

Sorry also no zoning experience but curious how you found the duplex! 

@Allison Steinly MLS. It was listed, is taxed as, and listed per the parcel # as a multifamily. I literally called the city 2 days prior to close based off a BP podcast I was listening to. Good thing I did!

I ended up asking for a 20k price reduction in case I have to convert it back to a SFR otherwise I'm going to back out.

The risk is with the appraisal, but for the refi and when I intend to sell years down the line...

@Bethany Moklebust

I saw the meet up y'all had but I was out of town. I'll endeavor to be at the next one.

No zoning experience here, either. I'd be interested in the outcome of the purchase and refi based on the property potential of a Multi-family or SFR. Keep us posted @Joshua Woods . The next meet up is next Friday at the downtown Da Boyz in the Elvis room at 6pm.  Ask for the Pruett reservation; see you there!

Hey man good to see you on here. One of the brokers in the area is a former harrier CO. Forget his name but he runs KW. You may consider stoping by and asking them.

@Joshua Woods If it is “grandfathered” under the current zoning, meaning they changed the zoning after it was built, etc., you are good to go. All you need to do is check the zoning ordinance to see how the municipality regulates non-confirming uses. Most zoning me will say if more than 50% is destroyed in a fire or disaster, you have six months or a year to fix it. If that term expires, you have to conform with the current zoning, meaning you would have to bulldoze or convert it to single family. If it looks like it was probably developed as a duplex and not converted into one, I wouldn’t even bat an eye at it. If it is a house that looks like it was divided, you might want to check with the planning department of the building permit office. But, regardless there is little the city can do in all honesty.

@Scott Lakas *check with planning or building inspections office.

@Scott Lakas

Thanks Scott! Yes, the city said I don't have to change anything. They said I can keep it as is. The rub is the appraisal. Would you, as an appraiser, or do you know fellow appraisers who would not appraise the home as a multifamily because it is zoned for SFR only? I need a good appraisal for the cash out refi portion of BRRRR. As in, would they say "it's zoned as an SFR so you need to make it an SFR for an appraisal?" Or say it functionally obsolete if I just put an arch between the duplexes for the appraisal?

To clarify, it is NOT grandfathered and is considered "nonconforming" per the city.

@Joshua Woods You are good to go unless it is really old and starting to revert back to land value. Wouldn’t worry about it at all. Great question and enjoy your new investment!!!

Thanks again Scott! I was told there was a possibility that an appraiser may say that I have to fix the property to what it was zoned as, which is kind of making me not want to take the risk, but based on what you're saying it's not really going to happen if it looks like a good multi-family property. I appreciate the response!

@Joshua Woods

You say you are in the process of buying it now so the appraisal related to the purchase will likely answer your question. If your purchase appraisal goes smoothly, likely so will the refi appraisal. If you do the refi quickly, your bank might use your purchase appraisal for the refi.

We sold a package of “grandfathered” non-conforming properties a year and a half ago (in Oklahoma City) and no one batted an eye. As others have said, had we lost a unit for some reason (fire), we would have been forced back to the current zoning in the recovery but the current status was accepted by all, both when we bought them and when we sold them. HTH

Dennis Burian

Rent OKC Metro, LLC

@Dennis Burian

It's a cash buy, so no appraisal on the initial purchase. I'm BRRRRing it, so will need the refi in about 2 months.

Quick update, just closed in the property. Talked to a couple other local appraisers to confirm what was posted here. General consensus is that an appraiser won't care if the city doesn't, and the lender will lend if an appraiser appraises. If it burns down, I'll deal with that then haha. I will post results once I go through the refi process.

Yep, that's good news @Joshua Woods !  I've never known an appraiser to go to the trouble to look at a zoning map to confirm what the tax rolls say is the case.  Generally the only time this happens is when there is a discrepancy between the tax rolls and the observable situation.