4 vs. 5 Unit Property - Financing Question

[Jason V.]

This might be a novel question, maybe not: I'm looking at a property that should be a 5 unit, but one unit does not currently have a C of O due to the lack of a working bathroom. It has been in this condition for the entire time under current ownership (at least 3 years.) The current owner rents what should be the 5th unit out as storage to the two tenants he currently has, and the space is labeled 'tenant storage'.

My question - how is the bank going to appraise/evaluate this? Will they take one look at it, call it a 5 unit, and say it needs a commercial loan? Or would they view it as the 4 unit it currently is? 

[Matt Motil]

If the appraiser is worth anything, the first thing they will do will be to pull the tax records and zoning to see what classification and how many units the building is currently assessed as. If it's currently taxed and zoned as five units, then the appraisal will start there and then account for the non-functioning bathroom appropriately.