Commercial lending requirements for a 5 unit located in SF zoning

Buying & Selling Real Estate
7yFollow

Commercial lending requirements for a 5 unit located in SF zoning

Jeff HornbergerBusiness Member
Investor · Spokane Valley, WA · Member since 2012 · 45 posts · 42 votes

HI BP friends, I need some insight. Im currently about to list a 5 unit apartment building for sale in Spokane WA. The property is an ex adult family home that has been converted 10 times over. It sits on 2 acres and located right behind this property are apartments. The seller swore up and down it was zoned multi-family etc but when I did some homework on the zoning it actually turned out that it was zoned single family and that currently it has a non-conforming use granted on it allowing it to remain a 5 unit building until someone rebuilds or if its destroyed and one had to rebuild. They would only be able to rebuild a single family home. Im guessing this will be a sticking point for any lender because they will no longer to be able to build a 5 unit building should something major happen to the house.. Does anyone have experience with this type of a scenario. Should I only be offering this property as cash terms only? Thanks in advance for the replies! 

[email protected]509-994-5007
Hornberger Property Management4.2286 Reviews
WebsiteView Page
0Reply
33 views

4 Replies

Jump to latestLatest
  • Brody Jett
    Real Estate Agent · Spokane, WA · Member since 2015 · 37 posts · 16 votes
    7y

    Could petition the County for a Rezone into the applicable zoning you are after. Your not trying to re zone to take a single family to hotel status. I petitioned for a 29.9 acre parcel that had a 10 acre minimum for  new structures. If I had  .1 acre more i can build another home but didnt plus across the street it was a 5 acre minimum. They went through with it. May be worth a shot Hope this helps. 

    Brody Jett

    Agent Prime Real Estate Group 

    0Reply
  • Deanna Joy
    Spokane, WA · Member since 2017 · 12 posts · 9 votes
    7y

    Jeff,
    You are correct that the zoning will be a sticking point for lenders, however, given the granted use, I see no reason why the property couldn't be financed. However, this issue may change the underwriting and potentially make qualification for a loan more difficult. I would recommend a couple of things. First, be upfront with any potential buyers and make sure they disclose the zoning issue to their lender. No point going halfway through the process only to discover that this particular lender is unwilling to finance because of this. If they ask right out of the gate, and secure their lender's agreement, then it shouldn't be a problem. The other issue for your potential buyers is that, even if they don't intend to rebuild, they may have trouble getting permits for other projects, such as additions or remodels, because of the zoning issue. This is something they need to know as they consider purchasing the property.

    I hope this helps. Keep in mind that my perspective is from the commercial lending side. If you want to know from a residential lender, I recommend reaching out to a few local banks and credit unions to inquire about the issue specifically. I can put you in touch with the manager of the RE department here at Global CU if that would be useful.

    0Reply
  • Deanna Joy
    Spokane, WA · Member since 2017 · 12 posts · 9 votes
    7y

    Whoops, I take it back. This is a 5-unit so you're looking at commercial financing anyway!

    0Reply
  • Jeff HornbergerBusiness Member
    OP
    Investor · Spokane Valley, WA · Member since 2012 · 45 posts · 42 votes
    7y

    @Deanna Joy, @Brody Jett, Thanks guys for your responses. Much appreciated. Wanted to follow up and let you know what I found out.. Last week I reached out to commercial lender and had them ask their underwriting dep't if they would see any issue with underwriting this deal and he said they wouldn't have any issues as they would be listed as a loss payee if the place were to ever burn down etc.. I did call Melissa at the city planning dep't and she was really helpful. She actually shared a law with me that stated that even if the property were to burn down a future buyer would still be able to construct a 5 unit building because it had legal non-conforming use permitted. So really there is no concern on this any more as I see it. It did raise a bunch of questions but I think I got them sorted out it looks like.. 

    Thanks again! 

    [email protected]509-994-5007
    Hornberger Property Management4.2286 Reviews
    WebsiteView Page
    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free