Purchased duplex, 1 year and $20k later found out it's zoned SF

[Trey M.]

So I purchased a "duplex" listing says duplex, agent says duplex, all of the paper work says multi-family and the disclosers say no zoning issues, passes inspection, even comes with both units rented. Turns out only zoned/permitted for SF. Undisclosed to me the MLS has agent notes stating that this is actually an SF with ADU, but they are leaving it up to buyers to investigate for themselves.
double kicker the ADU has ceilings that are just a couple inches shy of the 7" ceiling height requirement of legally counting as a BR&BA

Bonus I also spent about $20k+ in surprise mandatory repairs, that slipped by the inspection, so I could keep the home insured. Even if I could get the deal retracted, I'm already out a considerable amount of money. So I’m just trying to figure out what to make of this situation. The market is/was pretty good, it’s possible I could have a correct and honest listing and sell to someone who would be happy with this property and break close to even. Feeling a bit like my realtor/inspector was negligent and the seller was fraudulent though proving the seller was aware of zoning/building-codes/damage/unpermitted work probably would be challenging even then I'd have to calculate and provide proof of damages.  Currently thinking put some sweat equity in with repairs/upgrades over the next 3-6 months and either rent it as SF or/and sell when the markets high. Mentally preparing myself  to chalk this whole thing up to a really nasty learning experience.  On the plus side all of this happened while interest rates were low, a house $100k cheaper would be several hundred a month more then what I pay with current interest rates. 

So I'm just trying to figure out my path forward. 

[Gene Livingston]

Quote from @Trey M.:

Undisclosed to me the MLS has agent notes stating that this is actually an SF with ADU,

Zoning stuff is very jurisdiction-specific, but generally, 1-4 units is going to be "single family". I'd look up the detail description of the zoning code you are under, and maybe post that here. You might have problems, or not.  Many things around this topic aren't as bad as they sound. 

One thing you need to clearly understand about home inspections...there is no such thing as " passed the inspection". Inspections are not pass/fail, and they DO NOT have anything to do with what building inspectors do. They point out possible deficiencies in the property (only the ones they can visually see!), and are quite limited in scope.

So far from what you've said I don't see any fraud or misdealing here.