Selling commercially zoned house as residential?

Question

Hey yall, I have a property I'm looking to sell.  Wanted to know if anyone had any experience with this lately...It is an old house, and was originally zoned residential.  An attorney changed it to zoned as an office about 15 years ago.  I'm wanting to sell it.  I think my best shot at selling it is to sell to a residential buyer.  Does anyone know the problems associated with getting a residential mortgage on a house zoned for offices or commercial?  I can apply for rezoning, but I'm wondering if it's even necessary??  Just to be clear, I'm not worried about values of the property when zoned differently.  I'm only trying to make sure a buyer can easily purchase the property without having to jump through hoops.  Thanks.

Joel Owens · Answer

You said it was zoned as an office 15 years ago.

What has happened to the area since that time?Example looking at an area map looking down at an aerial the immediate vicinity property is the parcels to the left,right,across the street zoned residential or office??

The current and future land use plan where your property is located what does it say for proposed current and future use??

What I am getting at is if 15 years ago someone was pushing office and  got it rezoned and it never took off and today there is mainly residential around it then it should be easy for a rezone.

If the area has transformed into mainly office or a commercial corridor you will have trouble getting a variance now to change it back.I wouldn't in that situation as likely the highest and best use value is selling it for office or commercial.

If it is zoned office do not advertise it as residential as that is misleading.We have had lawsuits here before where a seller advertised a certain asset type and then the buyer found out later otherwise and sued.

Yes due diligence is on the buyer but they can still sue you for misleading them causing wasted time and aggravation.

Account Closed · Answer

steve..yu're right..it is the end buyers problem..but i want people to be easily financed!  haha...went to zoning department today..it's actually zoned O2, which techinically allows residential or office space..guess i'm in the clear on this one...whew..the rezoning costs a few grand, so i was hoping to avoid that..not to mention time factor  :)

Joel Owens · Answer

Alexander you would need a zoning attorney for your specific issue. Usually when you buy something there is a disclaimer in the fine print from the broker/agent absolving them of making claims or statements and for the buyer to perform their own due diligence. The broker/agent is just relaying information the seller is passing along to them.

If the seller intentionally mislead you would have to prove that in court which is very hard to do.

The local zoning attorney close to the property will usually have local juisdiction case law experience on how things will go. This varies by area.

No legal advice given.

Alexander Parunin · Answer

Joel, I have just had similar situation. Seller listed C-P (commercial professional) as SFR and I bought it for my family. Property was in need of major (structural) renovation, I spent a chunk of $ on redesign. Than when I went to County to submit plans for residential plan approval official said house was rezoned to C-P three years ago and seller never started development. I pulled records and it appeared that although his permits and designs expired by the time he was listing property, zoning stayed as C-P permanently. Obviously listing & selling broker never researched zoning since assessor website still showing Land use as SFR and even taxes had been paid as residential. On a side note property is located between two commercial parcels, second from major street, there are six properties in one cluster: 2x3 (total 6) and only 2 of them currently zoned for residential & 4 commercial including mine.

I would appreciate if you could share more information on a few questions:

1) What is possible resolution in this matter?

2) If you heard of law suites filed against dishonest sellers, who usually wins the suite?

3) What are the chances of rezoning back to residential, if any? Is it even worth trying?

Steve Babiak · Answer

The financing is going to be the end-buyer's problem, as already mentioned above in a couple of posts.

I was watching one REO in my area that was a building that had a hair salon on first floor and 2 residential apartments upstairs.  The listing originally did not mention anything regarding financing, and then the listing went off realtor.com - that happens when it goes pending.  Then the listing came back, and at that point it had a big notice that commercial financing would be needed if not an all cash offer.  So this stuff does happen.

Jim M. · Answer

Its surrounded by 5 other similar homes that are all rental properties.  The attorney simply used the home as an office and there was never any plan for commercial development.  The surrounding area is all homes this is just a case where the attorney rezoned it back in the 80's.

Jon Holdman · Answer

You should have a discussion with a planner at the planning and zoning commission (or whatever its called.)  If you search online, you may find zoning maps, descriptions of what's allowed in each zone (that should actually be in some city ordinance), and overall plans for what the city wants in that are.  You might be just fine, or you might be out of conformance.  Some background research, followed by a discussion with a planner should let you know where you stand.  At the seller, it behooves you to understand the situation.

Edgar B. · Answer

Joel is right, the city will dictate what is allowed on that parcel, if you can get a letter from the city statting that residential use is possible and a rebuilt letter (in case of fire) so the residence can be rebuilt and not have to comply with the commercial zonning, only then will you have a (legal - non conforming) parcel. If those two things can be obtained from city without any restriction you may be able to find a lender to do the loan.

Joel Owens · Answer

Banks do not like to loan on oddball properties today.They want all vanilla stuff on the books and are purging the weird stuff out.

So I would sell it as what is common now for that corridor.Anything else I think you are going to hit problems making the deal happen.

If this was a bunch of land for a retail or mixed use development that is different but not for what you have.

Ryan B. · Answer

Not exact same situation, but kind of similar.  I have a property that was an old bank built in 1911.  It has been rehabbed and transformed into a 3 bedroom house.  When I purchased it, the banks told me I would not be able to do a residential mortgage since it was originally a commercial building so I was stuck with a in house balloon loan.  This did not matter to me since it is a rental property, but could be a pain if I ever go to sell it to anyone else except an investor.

Selling commercially zoned house as residential?

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