Help! FHA Loan with a Zoning Variance?

Question

Help! I'm under contract to buy a triplex in Indianapolis' Fountain Square neighborhood, but I'm running into zoning problems with FHA. It will be my first property purchase, and I will be living in one of the units and renting out the other two. I love that part of Indy, and I hate watching this seem like it's falling apart!

The problem I'm running into is that the property is now zoned to be a single-family or duplex, but not a triplex. It DOES have a legal variance, so it IS legally operated as a triplex (and I have that documentation from the seller). But what the banks are telling me is that they won't be able to sell the mortgage because FHA won't insure the sold loan on a property that, if it were to be more than 2/3 destroyed, could not be built the way it stands now.

Does anybody know anything about this? Or what my options are? Right now, I'm trying to find a lender that will portfolio the loan and not sell it in hopes that they'll be able to do it, but I don't know what my other options may be. Please let me know as soon as you can!

Lindsay Wilcox · Answer

Don't get me wrong--I understand the benefit of talking to an attorney. That just isn't what I'm asking HERE. That answer has been thrown to me a few times on these forums, and I'm kind of tired of it. I understand when to consult an attorney. The depth of knowledge here ALSO provides feedback, though, which is why I'm asking the questions here. I consult other professionals too through other means, but I'm asking THESE people on THIS forum for their OWN knowledge. I understand nobody here is giving me qualified legal advice, because I haven't asked anyone here to give me qualified legal advice.

I'm asking whether anyone (like someone who owns small MF homes) has had any experience with this sort of thing, if anyone (like a lender, real estate agent, or experienced investor) is familiar with FHA regulations, if anyone (again, like a lender, real estate agent, or experienced investor) knows about some type of bank loan or opportunity I may not be considering.

I'm asking people here what THEY can contribute. Please take for granted that I'm also asking the relevant professionals I have personal contact with too. If I'm asking a question on BP, it's because I'm seeking feedback from the experience of people on BP.

Tom Goans · Answer

@Lindsay Wilcox,

You have a legal issue that needs to be unraveled by an attorney where the property is located. Just from your post, the issue is not clear.

I never rely on documentation obtained from a seller. I confirm everything with the governing entity. In your example, if the county or city provided a zoning variance, one will be of record.

Legally, legal advice can only be provided by a licensed attorney in the state where the property is located. You should only consider legal advice that is provided by an attorney you hire.

Seeking advice from an attorney in the area where the property is located can be a wise and very economical decision considering the alternative. An attorney will assure you are abiding by the federal and state laws and so are those with whom you are dealing. Every state has unique laws. The attorney will also provide the best advice and options for your specific needs with a consideration for your future.

Seeking legal advice from a licensed attorney where the property is located is the very best way for you to get accurate answers and options.

Lindsay Wilcox · Answer

Maybe, but then I'd have to have it reappraised.

I'd say it's a bargaining chip, but I know there's been lots of investor interest on the home, so I know there are other cash offers available if I can't get this together. If I can't get it figured out before my contract ends, I think I'm hosed.

Jesse Gonzalez · Answer

Sounds like you have a nice bargaining chip.  A portfolio might do it for you.  Can you combine two of the units into one unit, making it a duplex.