Incorrect Zoning on appraisal

[Melody26]

My husband and I recently received an offer for our house that has been off the market for a few months. It was a really good offer. Actually it has been the only one that would allow us to both pay off our mortgage and walk away with a little money in our pocket. Our house is very small - small enough that all of the offers we received, including this most recent one, have been from developers who want to knock down our house and build a new one in it's place. So the buyer came over, we signed all the papers, he dropped them off at the title company and headed to the city offices to file his permits. While he was there he found out that our property is zoned "Neighborhood Business" and he cannot build a new single-family home on it. I called the city myself, discussed our options, and at the end of the conversation was left with the same answer. We pulled our appraisal from our purchase and found that our appraisal is marked -

"Specific Zoning Classification: Residential"

"Zoning Description: Single-family dwelling"

"Zoning Compliance" - The "legal" box is checked, not the "legal non-conforming" as it should be

Do we have any sort of recourse against the title company for not completing this properly? We plan on taking our case to the Zoning Board, but there is no guarantee that they will re-zone our property. Any advice or suggestions are greatly appreciated!

 

[Hank Outlaw]

This sounds more like a question for a good real estate attorney. Have you consulted with one yet?

Not to excuse what the appraisal report indicated (because it was apparently incorrect)... but regardless of the appraisal the zoning "is what it is", i.e., this could have been checked with the proper source for whatever the reason (appraisal, selling, building, etc.)... the municipal zoning office. It doesn't sound like the builder / buyer based his purchase decision on the appraisal (based on the scenario you described).

Best wishes on your sale.

Hank O.

 

[Melody26]

We haven't checked with a real estate attorney yet, it's on our "thoughts/ideas" list. And you are correct - the buyer didn't base his purchase off of the appraisal because we didn't know that it was incorrect until after all of the papers had been signed.

Thanks Hank!

 

[Mr Rex]

Was there a RE agent involved in your purchase or current listing? It is part of their required due diligence to research the zoning.:icon_idea:

 

[Delta85]

A realtor should of caught this long before an appraiser was ever needed. If you are looking to blame someone, start with the realtor.

 

[David Mescon]

Just wondering here, but would your property be worth more if it were developed to its maximal commercial potential? Perhaps this revelation is a blessing in disguise. You may have lost the ability to market it to residential developers but it might be worth (substantially) more to a commercial developer. It's worth checking into.

 

[David Mescon]

Since your house was developed with a single family residence, it is likely that such a use was, at one time, a permitted use. When did you purchase it? When did the zoning change? Perhaps it was zoned residential when you bought it and was re-zoned during the period of time you have owned it. The original appraisal may, or may not have been incorrect. We don't have enough information to make that determination.

 

[Melody26]

The ironic part about all of this is that it's been listed with 2 different real estate agents, and both of them missed it.

 

[Melody26]

Since your house was developed with a single family residence, it is likely that such a use was, at one time, a permitted use. When did you purchase it? When did the zoning change? Perhaps it was zoned residential when you bought it and was re-zoned during the period of time you have owned it. The original appraisal may, or may not have been incorrect. We don't have enough information to make that determination.

Just wondering here, but would your property be worth more if it were developed to its maximal commercial potential? Perhaps this revelation is a blessing in disguise. You may have lost the ability to market it to residential developers but it might be worth (substantially) more to a commercial developer. It's worth checking into.

The house has been in the family for a long time - we purchased it on a land contract 5 years ago. I talked to someone in the Zoning Office and was told that as far back as he can see (30+ years) the property has been zoned this way. I don't think we can market it to a commercial developer because of where our plot of land/house is. We are the 3rd house on our block of 5. The 2 properties south of us are also zoned Neighborhood Business, but the 2 properties north of us (as well as all 3 houses across the street - 1 direct, 1 both north and south) are all Residential.

I should also add that new houses are popping up in our neighborhood on a daily basis. One of the houses on my side of the street was built in the last 6 years or so and 1 of the 3 across the street was actually finished just this spring. There are also about 8-10 within a few blocks from us, and probably 25+ within a square mile. A lot of the smaller houses are being knocked down to have mini-mcmansions put on them.

 

[Terrel L. Shields]

What exactly is "Neighborhood Business?" In my area towns "Residential-Office" allows a house but you can run a small biz out of it....