If you have zoning issues you might not be able to get a HARP refinance. Check your zoning codes before trying to get an appraisal. 

Q: I own a duplex building near Georgia Tech which is rented to students. It’s not the classic duplex with two equal sides. It has an upstairs, downstairs, and a finished basement. I split the upstairs and downstairs parts into two leases and signed leases with two groups of students.

I’m trying to do a HARP refinance, and because the house is listed as a duplex rather than a single family home, an appraisal is required. The appraiser is saying that the house is being used as a hostel or boarding house so it is a commercial, multi-unit dwelling. As a commercial building, the appraiser can’t perform an appraisal of the property since he can only do a residential appraisal.

The fact that I only signed two leases with students, not a separate lease for each room, seems to be irrelevant to him. (There are other details about the zoning and land use in the property record which also complicate the situation but I am leaving out that discussion here for simplicity.)

Because the appraiser will not turn in an actual appraisal, the lender is saying that there is no appraisal to appeal. Thus the refinance is dead because I cannot get an appraisal on the property.

Is there any way I can appeal the non-appraisal that the appraiser is refusing to do, despite what the lender is telling me? It seems I cannot find a lender other than the current lender to do a HARP refinance.

A: The one striking comment in your letter is that you have found other zoning and land use issues that you omitted, supposedly for the sake of clarity. However, it appears to us that you are ignoring these issues and that these zoning and land use issues might be the source of your problems.

When you mentioned that your home is a duplex, that issue alone should not cause a problem in refinancing a home. You gloss over that you made modifications to your duplex home. For an appraiser to refuse to prepare an appraisal on a home would seem to indicate to us that the appraiser is unable to see the home as a legal residential unit.

For example, take a single family home where a person decides to install a kitchen in every floor and then rent out each floor to different people. In creating this new residential arrangement, the homeowner might ignore certain municipal code requirements that insist on different residential dwellings having different ingress and egress points and complying with other housing requirements relating to multi-family dwellings.

You simply can’t just create a two-family home out of a single family home by renting it out to two different families (each non-related student is considered a “family” in this situation). A two-family home will need to comply with those local code requirements relating to the number of entrances, number of bathrooms, ceiling height, the existence of a kitchen, windows and other items that can make a home a home.

Then you have the issue of zoning. Some municipalities allow only single-family homes in certain areas. Then the zoning code allows multi-family housing in other areas. While you say that you own a duplex home, the real question is whether the duplex home is a legal duplex home. If your home started out as a single family home and you converted the home into a duplex without complying with the legal requirements in your area, you’ve created an illegal housing situation.

Your choice is to review the municipal and zoning ordinances and make sure your home complies with those ordinances or undo what you’ve created and restore the home to what it was before you leased it out.

The reality of the situation you’ve placed yourself in is that you won’t get a HARP refinance nor any other type of refinance with the home set up as you now have it.

The appraiser has politely told you that he or she can’t create the appraisal for your home. If you forced the appraiser to create the appraisal, the appraiser could come up with a value for the home, but the notes in the appraisal would say that the home was illegally converted and does not comply with the housing standards that would enable the lender to grant the loan.

Once the lender found out that the home was in a non-financeable condition, there would be no way for you to get the loan. The appraiser has chosen not to prepare this appraisal and give you the opportunity to fix your situation and then have the home appraised at a later date.

Given that you’ve leased the home to two sets of students, one set living on one floor and another set in a different floor, the appraiser appears correct to portray your home as a boarding house, hostel or dorm. Only you know what modifications you’ve made to the home since you first purchased it to allow different sets of students to live in the home as it now stands. The appraiser seems to think that these changes are not in compliance with housing ordinances or the zoning code in your area.

Unless you address the housing ordinance and zoning issues, you are unlikely to find a lender willing to finance or refinance your loan.

Please consult with a local real estate attorney who is well-versed in local building codes and zoning issues.