Expert: Jessica Bryan - 4/10/2010

Question
Hi,
My question comes in regards to residential loans for a commercially zoned property. I live in a very small community, Cheyenne, OK. The property in question is surrounded by 80% residential properties. At one time the property itself was a nursing home. It has now been closed for approximately five years. I have only dealt with residential loans personally in the past. We have spoke with the owners of the property as well as the city mayor in regards to having the property residentially zoned to initiate the loan process. The owners stated that they have had the electricity residentially zoned since the doors were closed; however, they have not had the property changed from commercial to residential. Okay, so here lies the problem. Can you get a residential loan for a commercial property, or does the zoning need to be changed to residential? If this is so, what is the best cost effective route? Thanks for your support!
Frances Williams

Answer
Dear Francis;
I was going to reject this question due to the fact that I am not a lender and therefore not as knowledgeable about this kind of a loan question; but I thought that I would write my answer to you so you can know how to proceed.  

Since a loan requires an appraisal which will reflect the highest and best use of the property,if it is a commercial piece of land which you intend to use for residential you will have to explain this to the lender and particularly to the underwriters.  I think that this will be difficult for them to okay.  Lenders are scrutinizing every loan far more carefully these days.  However, the best resource for your answers the lender.  Make a phone call to any mortgage lender or to your own bank to ask them.  You might also want to take a few minutes to call your town planning department to find out how difficult it will be to change the zoning on this property and what costs you will incur.  

Best wishes,
Jessica Bryan