Incorrect Zoning on appraisal

[Papoua Jose]

Homeowner's title insurance only covers matters that are recorded in the chain of title to the property.

Zoning is a municipal action and isn't recorded on a property title.

 

[Elliott]

Melody said, "I've gotten a hold of the Master Plan for our city which was originally written in 1999 and has been amended twice. In all of the Future Use maps our property (as well as the lots south of us and behind us) is zoned Residential."

I don't know Michigan's procedures, but most zoning changes require notification to the registered homeowner when a change is proposed. Did you receive notice? So when did the zoning change?

It would seem hard for the realtor or the appraiser to pick up the change, along with your disclosure that you thought it was also residential.

 

[Gregory Beck]

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!

I can't believe you live in the house and you don't know the zoning. Are you kidding. How about when you bought the house, what did that appraisal say? Didn't you bother to look at that appraisal? I think you should have known the zoning when you purchased.

 

[Mark K]

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

In my area, NB is non-residential, local business, excluding things like strip malls, gas stations, MickyD's, etc.

Mostly its for small office development, real estate offices/dental/medical/title company, etc. No high intensity Gen.Comm. (C-3 in this area).

Residential is grandfathered and conversion to comm. is allowed but if demolished, no residential rebuild.

 

[George Hatch]

Homeowner buys a home and gets it financed. They would have no reason to make a specific inquiry into the zoning. In fact, the appraiser in this case made the same assumption in lieu of taking the time to obtain the more accurate information.

The homeowner's actions would normally be considered quite reasonable under the circumstances but in terms of appraising the property and what we expect out of appraisers I would consider this to be an avoidable error for an appraiser to make. We're supposed to know better. That error may not have affected the value conclusion but if most of the offers have been for land value (by developers who are using the same assumptions) then that seems to increase the possibility that maybe this error is a bigger problem to the value conclusion then might otherwise seem apparent.

As a practical matter the situation as described seems to fit the pattern that's common for many zoning plans - commercial zoning for those properties that front the main drag with a transitional zoning for the 2 or 3 lots off the main drag and leading into the residential neighborhood. Those transitional or buffer lots are often built out with office or other commercial uses that don't generate a lot of traffic, don't generate a lot of noise and don't require retail exposure. Those lots are seldom worth as much as the general commercial zoned lots in the area and are also sometimes worth less than the residential-only lots in the same neighborhood. The narrow frontage of this lot would be a problem for most forms of development other than residential because of the tradeoff between the orientation of any commercial structures onsite as well as fitting the requisite onsite parking.

The bottom line is that the existing use may very well be the best use for the site in the current market, but the typical buyer will probably not be a developer or spec builder ('cause they can't do what they want to do with the site). It will be someone who will actually use the property the way it sits.

 

[Elliott]

And I don't know why this didn't dawn on me (us?) earlier. Melody, you aren't a client or intended user of the appraisal and would most likely not have any standing to sue the appraiser.

 

[Melody26]

I can't believe you live in the house and you don't know the zoning. Are you kidding. How about when you bought the house, what did that appraisal say? Didn't you bother to look at that appraisal? I think you should have known the zoning when you purchased.

We did look at our appraisal - it is marked just as I previously posted:

"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

And this is wrong. Had my husband and I known that the property was Neighborhood Residential we would not have gone through with the purchase.

 

[Melody26]

And I don't know why this didn't dawn on me (us?) earlier. Melody, you aren't a client or intended user of the appraisal and would most likely not have any standing to sue the appraiser.

I actually wondered about that last night since the mortgage company hired the appraisal company, not us.

 

[Melody26]

Melody said, "I've gotten a hold of the Master Plan for our city which was originally written in 1999 and has been amended twice. In all of the Future Use maps our property (as well as the lots south of us and behind us) is zoned Residential."

I don't know Michigan's procedures, but most zoning changes require notification to the registered homeowner when a change is proposed. Did you receive notice? So when did the zoning change?

It would seem hard for the realtor or the appraiser to pick up the change, along with your disclosure that you thought it was also residential.

We didn't receive any sort of notices, but according to the zoning department the zoning hasn't changed for 30+ years and we only purchased the property 5 years ago.

 

[Melody26]

As of now, my husband and I aren't proceeding with any sort of action. I've talked to a friend, who used to be a member on the zoning board, and was told that we should have no problem being permitted a variance to have our house knocked down for a single-family home to be built on our lot, especially given our proximity to the downtown area in which we live. However since our buyer has walked, there is no use in spending the money (it's a $700 non-refundable application fee) if we don't have a plan. As for having the property rezoned, he said that we could "probably" get it done, however it's really not worth the headache or the $1000 application fee.

We are going to reach out to our buyer one last time to see what he has to say. We are more than willing to pay the variance fee and make the purchase agreement contingent upon it being granted. If worse comes to worse we can rent the property and move on or just stay here until we can find a buyer who is willing to wait for the variance to be granted.