Hoping I can get some insight to help us close a deal. We are currently in Escrow on a 2 unit property (Separate structures). During the Appraisal we found out that our lot is zoned R1 (So only one unit) and since there is second unit it is non-conforming. This means that our lender no longer wants to loan on the property. Since it is non-conforming the code states that if the property is damaged by more than 50% we can NOT rebuild two units, it would have to only be one unit. The city hasn't been very helpful in helping us understand if the other unit was legal at one time, if there was some variance or if it was grandfathered in. They also don't have any record of permits for the second unit. Does anyone have any experience with this?
- We plan to occupy one unit
- We are using FHA
- The second unit has its own address, trash cans, electricity bill etc.
In my city, many of the buildings are older. Many of them could not be built back if they were destroyed - at least per zoning laws. For example, there are many duplexes (we call them 2 flats) which are not zoned for single family dwellings. Banks lend on them all the time. If the structure is destroyed, you should get a similar replacement structure in square footage. This is probably just a situation with that bank. Try another.
While I can't answer your question about the rebuild value I can tell you that I purchased a duplex about 11 years ago that is zoned rs8 but had been used as a duplex and separately metered as such for many years before my purchase. I just went to the city and asked them to make it a "non conforming legal duplex" and wrote my offer on the property with that qualification as a contingency. Because the property had a history of being used that way the city didn't have any problem with it. The bank didn't have any problem with it either.
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