I have been looking for my first investment property for the last 90 days. Owner occupied multi-family. I’ve looked at dozens of houses and have even placed three offers that were ultimately rejected for a different offer. I finally found a house that I am going to be putting an offer in today, and everything seemed to be smooth sailing until my realtor calls me and tells me that the property is not zoned correctly.
It is a three-story duplex in Brewerytown. It is currently zoned as RSA5 and needs to be zoned RM1. Since I am moving forward with an FHA loan my lender said the zoning must be proper before going to settlement or else the loan will be denied. Initially, this didn't seem like the biggest issue in the world because I have no issue doing the hard work myself or from what I've been reading just hiring an expediter and getting it done and over with.
However, my realtor also says since it is technically not my house I cannot do the work to get the proper zoning permit. Over the course of the last two hours, here are the options that I have determined that I have. Any help in validating these options or advice on how to proceed would be greatly appreciated. I really want this house!
1) increase the offer on the listing slightly to compensate for the current owner to do the zoning himself as a contingency of the offer. 2) hire a expediter/zoning lawyer to work on behalf of both of us to get the proper zoning acquired and have a contract in place that says once this action is executed the seller will sell the house only to me. 3) buy the house as is and get it appraised as a single-family home which could ultimately negatively affect my lending power, but once the house is under my ownership I could file for the proper zoning and continue with plans as originally wanted. 4) I read an article that said if I do go under contract for this house the current owner could give written permission for me as the buyer to go ahead and undertake the process of getting the proper zoning acquired. Does anyone know if this is true for Philadelphia?
Hi @Melanie Ruff , Does the current owner have the rental licenses for the units? If the property was given rental licenses for 2 units, that may solve the RSA5 issue. Also, if you want to message me I can walk you through how to look-up online to see if there was every a variance filed to make the 2-units legal. Either one of those scenarios might solve the problem.
Unfortunately, it's not really possible to expedite the zoning process. Even if you found an attorney who works fast, you have to wait until there's a scheduled community meeting, get support from the community, file paperwork, appeal it, then go to the zoning hearing and preach your case to have the property rezoned. The process can take 6 months and even then they might refuse the variance.
The first thing I would do is check the rental licenses and if there was a variance ever filed (that allows for 2 units).
Note: I wouldn't buy this unless you can legally rent both units. Otherwise, it leaves you open to lawsuits and insurance issues if there were ever a problem with a tenant.
And to answer your questions:
1) I would not increase your offer. If anything you could say, "this property is being used illegally and no one will be able to finance it." And then ask for a discount or ask them to owner-finance while you work with the city.
2) I answered the question about the zoning attorney. It takes a lot of time.
3) Buying "as-is" is an option but if you go this route, again you should ask for a big discount and approach it as if you are buying a SFH. There's no guarantee you'll get approved for a duplex.
4) Yep, you can definitely do this. But you would assume all the risk and expenses for the zoning variance.
Sorry for the bummer info. I hoped this helps some. If you need any recommendations for attorneys or help with looking up the docs, just message me.
I am very familiar with the Brewerytown neighborhood and currently have quite a few multi family projects there.
A few quick things;
Your realtor is incorrect, you have every right to to go through the zoning process even if you do not own the house because you have financial interest. I have done this numerous times while under contract
Brewerytown is very tough to get multi family variances these days especially when it comes to an RSA zoned property
I’ll message you my phone number. I can provide resources and guidance if you’d like.