Profile picture for TLC852

What does non-conforming mean?

in reference to 770-Hillcrest-Dr-Laguna-Beach-CA-92651
http://www.zillow.com/hom ... 412_zpid/
  • October 22 2011 - Monte Sereno
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Answers (20)

Best Answer

Sharon is correct with respect to the description and narrative about the property, mostly. The others talked about a non-conforming LOAN which has nothing to do with the description of the property.

Current variance allows for 12 units, but there are more on the property, which means its either illlegal and must be torn down OR the extra units are grandfathered in.

What commonly happens is the variance - which means zoming allows for a lesser amount but the variance allows for 12 units, and a 12 unit building was built, but some of the units may have been 'spilt' into more units, ie a two bedroom unit was made into two one bedroom units - illegally, and was done to get more rent.

You must check with the zoning department in Laguna Beach and see if you purchased it if (1) the extra units must be converted back to a 12 unit building at time of transfer or (2) its OK to keep them that way BUT if a fire destroyed the property you could only build 12 units.

One easy way to see how many are 'legal' is to count the GAS METERS on the outside of the building. This building probably only has 12, and the other units dont have gas, only electricity.

Since this is a high quality building, it probably is legal but non-conforming meaning all units are 'legal' but could only be rebuilt to 12 units in case of fire. CHECK with city as future planning may DOWNZONE this property from its current variance ... Variances sometimes can and are changed - that why they are called variances and not a change in zoning.



  • October 22 2011
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I said Chad instead of Hamp. Sorry 'bout that. Thanks Hamp for your kind words.
 
Happy funding, Rudi
  • October 24 2011
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Thank you Sunny & Chad for your kind words.

Happy funding, Rudi
  • October 24 2011
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The quick-and-dirty definition is that Non-Conforming loans don't meet federal guidelines for reselling to the government (e.g., Freddie Mac, Fannie Mae, etc).

  • October 24 2011
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Profile picture for sunnyview
Rudi is jewel. He is one that I would call in a heartbeat.
  • October 23 2011
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Profile picture for TLC852
Ladies, and gentleman! We have a best answer! Thank you Mr. Curtis! However, I did learn a great deal and discovered "Rudi"! Thanks everyone!
  • October 23 2011
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Profile picture for TLC852
Thank You Mr. Walker! Howvever you position, particular in reference to .."A large portion of real-estate loans are qualified as non-conforming because either the borrower's financial status or the property type does not meet bank guidelines"...seems a inapplicable in blanket definition as each potential buyer would most likely be BYOF (bring your own financing) and be they individual, institution, corporate, investor, speculator, commercial, etc. their fiscal packaging would be different by sector of buyer, correct? Therefore I'm going to stick with my previous conclusion that the term, used here, is strictly building code/zoning related, but, as I do have some large RE projects in my personal and professional pipeline your information is considerably appreciated! Particularly the enlightenment of "hard money lenders", thank you.
-Mr. Yonce!
Your insight confirming my supposition of  challenging project "best practices" is appreciated, thank you. I don't know whom "Rudi" is ( I live in Sacramento, Ca) , but I will accept your recommendation should I proceed in this market. I'm thinking it will "keep" until I have a little more personal and professional (regional?) "clout" to bring to bear. Thank you. To clarify, my intent was to return this to private residence(s) and perhaps sublet the smaller spaces seasonally or in-law suites? No jumbo anything required except on my own part
Both of these responses however do much to expose the regional "influences" on conditions to and of eligibility to purchase, particularly in the multi-occpancy market. I've learn far more than I had expected, thank you all!
  • October 22 2011
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A non-conforming loan is a loan that fails to meet bank criteria for funding.

First, you will find that most Non-C has fallen off, but I read this on wiki and it really says it best.

Reasons include the loan amount is higher than the conforming loan limit (for mortgage loans), lack of sufficient credit, the unorthodox nature of the use of funds, or the collateral backing it. In many cases, non-conforming loans can be funded by hard money lenders, or private institutions/money. A large portion of real-estate loans are qualified as non-conforming because either the borrower's financial status or the property type does not meet bank guidelines. Non-conforming loans can be either A-paper or subprime loans.

The flexibility of private money can allow for a much wider range of deals to be funded, although more detailed and substantive collateral and documentation may be required by a lender.

  • October 22 2011
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You should make approval for your plan, by any and all regulating authorities and/or entities, a contingency in any offer to purchase.

To clarify the conforming-ness of financing. You can't buy a building with more than 4 units with conforming financing. You can't buy a unit, detached or within a multi-unit building, that is over a certain price. The original description has nothing to do with financing. The concept of conforming financing will not apply if you buy it and convert it. That is not part of the discussion. You are going to need commercial financing to buy the property, and the folks who buy the reconfigured units from you are going to need jumbo non conforming financing to buy the units.

My guess is that the count, or whoever got the 12 unit variance, sold the property to someone, who reconfigured the 12 units into 16, by turning the upstairs of one unit into the 'penthouse" etc.... That said, I think it could be perceived as a benefit to the community to reduce the density, while also bolstering the tax base. Better yet, I don't see how it could be ill perceived. But this is as complex as residential transactions get and you need a financing expert, or two.

I suggest you call Rudi! He's one of the only people you'll bump into on this free public opinion fountain, that would even know where to start. And, he knows how to finish!
  • October 22 2011
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Profile picture for TLC852
Thank you all! I'm going to conclude the answer lies in Building Code/Permits! Financial terms ALWAYS have alternative meanings (depending on who's exposed, lol) but Building codes are ALWAYS concrete (excuse the pun). As the term referenced internal units (and by number) I'll have to consider it's meaning is non-directly financial in nature. Thank you all again for your time and consideration. Since the meaning has vestment with each of your expertise, I cannot fairly chose a single "best answer" as they all contributed. They we ALL best answers! Thank you.
  • October 22 2011
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First and foremost, thank you all for your time on a Saturday! I must admit this is interesting...both arguments (loan related vs. zoning) seem to hold great merit. But ALL posts suggest this property is challenging for my desired aim. May I ask all, prior to (contingent on) purchase engagement, would it be worth my while to engage the zoning commission on the likelihood of approval as my improvements would increase it's tax model as well.
This is an historic property, would not the city benefit from its restoration as a premier property? It is my experience in these matters that zoning permitting, etc are merely valuation mechanics (i.e. taxation) I suppose it comes down to how does one "privatize" a commercial property? This would eliminate the "commercial" financing non-conformity angle, leaving the zoning non-conformity to whatever I can encourage the commission to consider? A degree of "celebrity" never hurt a public servants feelings.
  • October 22 2011
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hi tlc
non confirming means , loan will not be sold to fannie mae , freddie mac, etc. another word lender will lend his own money and will not sell to wall street. serviser is transferable some cases .

if you have question feel free to contact me.

Omar Khamisa
Mortgage Loan Manager
People's Choice Mortgage Group
NMLS # 369325
DRE # 01891360
[phone number deleted by Zillow moderator.  Please refer to our Good Neighbor policy for posting guidelines]
  • October 22 2011
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TLC,

Re-read the listing. It may mean that the 4 units from 13 - 16 were built without the required permits, since they mention the first 12 where approved. Laguna Beach probably has one of the most difficult processes to gain acceptance to changes in existing properties, let alone having the improvements signed off by the city. In this case I would say buyer beware.

Happy funding, Rudi
  • October 22 2011
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Profile picture for Ofe Polack
You may find that term used frequently when a lot or an improvement does not conform to the zoning use because it existed prior to the enactment or amendment of the zoning ordinance.   If the nonconforming use is allowed to continue indefinitly it is considered to be grandfathered.  What you need to find out is whether the property is nonconforming as long as it complies with the regulations that govern nonconformities in the town, or until it is destroyed or torn down or whether it is grandfathered.
  • October 22 2011
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That's odd. It seems like the whole property would either conform to the zoning, or not conform to the zoning. In this case non-conforming could refer to the condition of those particular units not meeting current building codes, not zoning regs. Call the Agent! Ask them the question! That's what they get paid for.

This would affect the value, and the insurability.
  • October 22 2011
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TLC,

Your link shows a multi-million dollar property. This can only be financed with a non-conforming loan (Jumbo Loan) if it was a 1-4 unit. Non-conforming loans are for i - 4 unit properties properties where the loan limit is over a certain dollar amount dictated by the county the property is in.

We have no dollar limits on luxury properties. We also have programs not readily found elsewhere. I would be happy to give you a quote. Although on this property there are 16 units. The information is wrong on that listing. Any property with 5 or more units requires a commercial loan. I can also help you with that. Please see my website.

Happy funding, Rudi

Happy funding, Rudi
  • October 22 2011
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Mz. Lewis, I think you are correct...does this affect insurance? Valuation? I like the property and am interested in restoring it to at least 3 residences (Huge NY-style estate condos) Does the "grandfather'ing, expire when it changes hands? What kind of exposure does this present?
  • October 22 2011
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I'm not sure you are correct Mr. Snyder, did you look at the property link?
  • October 22 2011
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Profile picture for DaleSnyder
Hello,

I am thinking you are referring to loans...  here is a great link to the answer this:

http://en.wikipedia.org/wiki/Non-conforming_loan

Hope this helps...

  • October 22 2011
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Profile picture for Sharon Lewis

This probably means that it no longer conforms to current  

zoning rules, so if you tore it down or if there was a fire or something like that, you would have to rebuild it to current zoning rules. It is allowed to remain because it was 'grandfathered' in ,built before the rules changed.                                                              
 

  • October 22 2011
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