I was going to close next week on a 4-unit in Ohio. Today I got the appraisal back and it stated that the area has been rezoned to Single Family Houses. If the building is ever destroyed, I can only rebuild a SFH. For this reason no banks will give me financing. (I spoke to 3 today) And if I paid cash (like the seller did) it would be almost impossible to sell again.
The bad news is I already paid several hundred dollars for the inspection and several hundred dollars for the appraisal. Isn’t this an issue that should have been disclosed by the seller and/or his agent? If I had known this information, I would never have made an offer.
Is the seller and/or his agent liable for my damages? Obviously I need to consult an attorney, but I thought I’d solicit feedback. Additionally, I live in California. This means I would have to travel to Ohio, if necessary, to go to Small Claims Court. Would they be liable for those costs as well? Would the property manager for my existing properties in the area be able to go to Small Claims Court on my behalf? Are Attorneys able to represent you in Small Claims Court if you are not there?
If the seller misrepresented the zoning on the property, then I believe that they could be liable for your damages. However, I don’t view this zoning issue as a big deal. If you buy the building as a 4 unit and it later burns down, the insurance will pay you for it. You can then decide whether to put a single family house on the property; apply for a variance; or simply sell the land and move on. You shouldn’t be out anything. I don’t see the big deal - I have many multis that are zoned the same way as this property and have gotten financing on all of them.
Mike
I agree with you. I can not understand why the bank is concerned if I have insurance.
Mike,
If it does not violate the forum rules, perhaps your can contact me and point me in the direction of a bank in SW Ohio that has not taken issue with this situation, please.
Thank you
Stephen
My suggestion is to go ask the SUCCESSFUL landlords at your local REIA. They will know which local banks are investor friendly.
Good Luck,
Mike
Unless the purchase contract addresses it specifically, I believe that zoning should be part of a purchaser’s due diligence.
That being said, do you have a financing contingency in your purchase contract? If so, you should be able to get out of the deal…(I am NOT an accountant, but you can probably write off your costs on next year’s taxes)…
Chris