That's the flood zone stuff, or stuff where value is less than what is owed, or maybe partials, land locked, drainage ditches, stuff like that. 

Zoning is going to directly affect the type of loan you get.

In SF zoned areas, they usually start with a negative equity position meaning the cost to add is more than the value added. 

If Planning does determine the existence of your ground floor unit, it will require you to legalize the unit through the existing Planning code process assuming zoning supports the third unit OR using the new ADU program making your fast track condo conversion a passing dream.With regards, to some of your latter comments and questions:1) Any un-permitted work (including corrections) is not a good idea as a quick compliant from a neighbor can bring an inspector knocking on your door with a NOV especially in the current environment where everyone is SIP.2) Legalizing existing constructed spaces can be hit and miss based on the inspector you get.

Energy-efficient features, soundproofing, shared amenities, and local zoning compliance are crucial.

I have a Vacant Lot zoned Mixed Use in the Cape that I don't know who will buy it, we've only worked with single residential home builders until now.

(is it OK to not re-zone at all?)

There are zero zoning restrictions, so the market is beyond saturated. 

@Jonathan Mueller is it zoned for residential occupancy? 

Note above- Chris saw a post on BP, Rick reached out and that same day they rolled out the red carpet for me at the REI offices and we closed a deal.