The answer from an appraiser. Highest and best use comes into question. Hypothetical reasoning can conflict with actual use. Not known is whether there is interior access. If not the cost to cure by conversion to a single family unit and creating interior access. Occupancy issues to current zoning will come into question with single family use. Some municipalities allow accessory kitchens for an in law apartment or other family use with a second kitchen and still be called a one family dwelling. Zoning just does not want homes chopped up into smaller sections unless allowed for the fear of occupancy issues. In my area of expertise I often find that two family dwellings are often not cared for and suffer obsolescence from deferred maintenance thus lower values than single family homes. Since most multi family homes are located in higher density areas external obsolescence must be considered. I would seek a real estate agent to comp out the home as a single family dwelling. If better comps are available seek a reconsideration of value based on a hypothetical assumption. And by all means create interior access so there is no cost to cure. A privacy door can utilized. The look and feel of a one family dwelling will come into question and its actual cost to cure to make it comparable to other single family homes similar to its original style.... more
The specific laws do differ a bit from state to state. I don't know if Washington state has them, but in Massachusetts, we have real estate attorneys who will work for a fixed fee. Also, when your brother "signs over" the property, there does need to be monetary consideration in order for the transaction to be binding ... a dollar is acceptable consideration.
This would be the lender' call. You don't own the business but you took expenses against this part time job. I would think if you can prove the dissolution of your relationship with both property and business without further need of either you should have an argument. If you have an established income for the past two years and no future debts or obligations for this business, then you should be able to leave it behind. I would be happy to speak with you off line.