Expert: Dick Dennis - 12/14/2008

Question
QUESTION: Mr. Dennis,
I have a home for sale in Michigan.  It is zoned C-1.  Our realtor tells us this is going to be almost impossible to sell due to the zoning.  Our asking price falls in the category of "first time buyers."  The problem:  because of the zoning, we're told banks will not finance without 20-30% down and many banks will not finance at all.  Our realtor further stated FHA financing is not an option due to zoning. First time buyers don't normally have $30,000 for a down payment, so we're "stuck."  Do you agree with what we've been told about the difficulty - possibly non-existent chance of a buyer obtaining financing?  Our township did pass an ordinance stating homes in the C-1 zoned district may be rebuilt if there is a fire, etc. This seems to be the concern of the mortgate companies (the lack of ability to rebuild in case of fire, etc.)  
Your comments/suggestions would be greatly appreciated.

ANSWER: I wouldn't say it is almost impossible to sell, but I would say it will be very difficult if you don't sell it someone who wants to open up a small store or other small business, even if it was the only business in the neighborhood.

If you really want to sell that property, go to the township (county or town) and ask what kind of business can be located there. Someone who has ideas of opening his first business might just be interested.

Trouble is, now commercial properties are falling into the same hard-to-foind-financing category, too. But have your Realtor, or do it yourself, check with the township and see what the possibility is of locating a business there . . . how about a real estate office, or pizza shop, or CPA or attorney? I wish you well.

Dick Dennis
dixiedee13@aol.com

---------- FOLLOW-UP ----------

QUESTION: Thank you for your response.  I appreciate the information and suggestions.  Are you in agreeance with that we've been told by our realtor?  I've read comments on various websites suggesting maybe our realtor is not so knowledgeable on the financing issue.  What is your experience with buyers obtaining financing for residential purposes (on a commercially-zoned residence)?

Answer
To be quite frank, Lori, it does seem like your Realtor did not offer as much valid finance information as could be offered. More so, I would say your Realtor should have suggested, like I did, other avenues to solve your problem. Also, Lori, in this kind of down market, I have not had any opportunities to solve a similar problem for somebody else. If I had, I certainly would have explored different ways to help my client. When I first started in real estate 37 years ago, I would have immediately jumped on the opportunity to turn that property into a small strip center . . . by approaching the neighbors to see if they'd be interested in participating in such a commercial enterprise. Everybody comes out ahead that way. But not today. Too many people are just too naive about real estate, not to mention banks reticence about lending.

Dick Dennis