Hold or Sell for Commercial Rezoning

General Real Estate Investing
1

I have a home that I’ve lived in for 13 years, as a
single family home. Before I purchased it, the
upstairs and downstairs were rented out separately
with two electric meters, and one gas meter. Current
fair market value on the home is $158K. If it were
sold as a duplex (with a few upgrades < $5K), it would
sell for about $195K.

Recently, a very large business (which is on the
backside of my property, so its front side is on a
major street on prime commercial property), purchased
the two homes next to me on my street. Both of those
smaller homes are back-to-back with this business.
The business now wants to purchase my home, but
expects that they don’t have to pay me fair market
value. Three of the offers they’ve mentioned have
been ridiculously low enough that, if accepted, I
couldn’t even purchase a similiar home in the same
area.

This business has been hounding me to sell, and I had
to enlist an agent to help out. Now, I have to pay
her commission upon the sale, and that could have been
avoided. Here are additional conditions:

-The business that wants my property also says they
are going to tear the homes down and have the property
rezoned to light commercial so they can use it as a
parking lot. I have to wonder how much ROI they can
get by using the property as a parking lot since these
are small pieces of property.

-The city has declared the area around our street
blighted for commercial redevelopment (about 1/2 mile
radius).

-The city announced last summer during a town meeting
that they plan to make a throughway street to connect
to a current T-intersection (also part of the blight
study). The intersection that connects the existing
main road is–also prime commercial. The options that
the city propsed were 1) opening up my street from a
cul de sac to adjoin and connect the current
T-intersection. Doing this would also make property
on my street, when rezoned from residential to
commercial, high profile. 2) Connect a residential
street one block west of me, and two blocks west of
the T-intersection. More homes would be affected with
this option. 3) Connect a street four blocks west
that has some cottage businesses and a couple of
homes, and is closer to the interstate entrance that
it is to the T-intersection. This seems like the
least likely option.

-The city responded to my GRAMA request saying that no
decision has yet been made on which of the three
options they have chosen as the through street.

-The person contacting me from the business has a
neighbor on the city’s planning and zoning committee,
who is also good friends with out city’s mayor. (My
source is reliable).

Here are options I’m considersing:

-Hold out, and continue living on the property, which
will be right next to the business after they tear the
existing homes down. Have my home rezoned to
commercial and try to resell it regardless of what the
city decides to do with the through street options.

-Hold out, spend the money I’d have to pay in a
commission to fix my home up for duplex rental, rent
and move.

-Tell my story to an investor and see if he/she would be interested.

-Sell to the business, knowing that I may be ‘giving’
away prime commercial property, or knowing my home is
worth much more with its fair market value.

Any tips and/or advice will be considered. Thanks for
your input.

2

Hello,

I will not give any advice on this other than to direct your attention to recent happenings in New Jersey pertaining to eminent domain and the upper court rulings in support of local goverments ability to take property for redevelopment concerns.

3

Eminent domain sucks in most instances, most of the time it does not do what it is supposed to do and be for the betterment of EVERYONE (see also not just some big corp). I don’t say much at work about it though, one of our clients (law firm) represented the developers in the Supreme Court case in regards to a chunk of land in New London, CT that was to be used for a mall or something like that.

4

True…since the Supreme Court’s ED ruling in CT, there has been a flood of cases nation wide where businesses are capitalizing on property owners.

I’m asking about two basic options: hold or sell. Each option has alternatives. If it were your property, what would you do, and why?

For the hold option, I’ve considered ED and what has happened in CT. I’m thinking that if the business wanting my property has the property next to me rezoned as commercial, I can have mine rezoned the same and then sell to a smaller business. There are plenty of cottage businesses in the area that would appreciate the traffic that the business next door would bring them. So, if the city says my property is blighted residential and should be rezoned as commercial, I can do that. Even if they can enforce how my property should be zoned, I don’t believe they can tell me WHO my property has to be sold to as long as it is used within the zoning regulations.

For the sell option, I’m considering opportunity cost and fair market value. If I sell and if this does become prime commercial property…that’s a big loss. What’s more, I don’t see accepting less than FMV as reasonable.

5

I can’t speak on the ED issue (definitely contact your RE attorney on that).

However, based on the adjacent owner’s aggressive attempts to buy your lot for use as a parking lot, it seems they may be desperate (or at least hot) for parking space, possibly to fulfill a ratio requirement (ie 1 stall per 200 sf of retail space) and maybe additional access options as well. Thus, you may have more bargaining power than you know.

Regarding the rezone issues… If the properties adjacent to you have been rezoned to commercial and your property is designated for future commercial use, you may want to explore rezoning it yourself now. A jurisdiction always has criteria for approving rezones, and the compatibility with surrounding uses/zones is almost always the central criterion. Or the city may be planning an area-wide rezone, which would save you a lot of permitting and consultant fees (and headaches too… rezones can be painful). After you rezone your lot, market to some potential buyers and create a bidding battle. If the adjacent business really needs your lot to make their project fly, they’ll pay what they have to. Otherwise, you now have a commercial lot, which in some zoning designations also allows uses like multi-family or mixed use (more allowed uses = more interested parties).

6

call me crazy but why did you have to hire an agent to tell them no?
if they keep bugging you can you talk to a lawyer about harrassment? i wouldn’t to run it by legal council.
you said they have made three offers to you, have you counter offererd with an outrageous crazy price.
my strategy would be to ask for a meeting with whoever is in charge of the project–counter them with somthing crazy high a. they might accept b. if they don’t explain that you feel just as offended with their low offer, and now that your both done insulting each other—and if they would like to talk about a serious offer then you would love to listen.
just my opinion sometimes its just a matter of frankness