Expert: Dick Dennis - 4/29/2007

Question
We bought a property from an individual that the owner had lived in for several years and rented out for a year.  We brought his loan current and took over payments on his existing loan.  We did a title search but no title policy.  We rehabbed the property and have had the property for sale for 6 months.  We finally get 2 interested buyers, and we find out from one of the buyers agents who went down to the zoning office and discovered that the property is zoned commercial.  Her buyers are qualifed for a residential loan, so they can't buy the property unless the zoning is changed to residential.  The other interested buyer is paying all cash.

1.  Can we sell to the all-cash buyer without changing the zoning?  Can someone live in a property as residential with a commercial zoning?  What is our obligation/liability to disclose the commercial zoning?

2.  What is our best argument for getting the city to change the zoning back to residential quickly?  It hasn't been used as a commercial property for many years.  How did the guy we bought it from get a residential loan when the zoning was likely commercial at the time he bought it?

HELP!  We need to sell this house to one of these two buyers.  We don't know what our rights, recources, and consequences are.

Answer
Unless your town has unusual zoning laws, Angie, residential can function in higher zoning, but higher zoning cannot function in lower zoning. So, to sell a house in a commercial zone is okay. But not visa versa. So, it looks like you're going to sell it to the all-cash buyer. As for the lender, that is their policy. They just won't lend on a residental property in a commercial area. I do wish you well.

Dick Dennis