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Real Estate Zoning Not Sexy.jpg

How a property is zoned may be one of the most overlooked factors of a real estate transaction. What may be more overlooked is how neighboring properties are zoned. Both could have a significant impact on value.

Not many people like to be told what they can and cannot do with anything let alone the property they own. At the same time, if there are rules, it is best that all play by them and most expect it to be that way. That is where zoning comes in. In short, zoning is how the government controls the physical development of land and the kinds of uses to which each individual property may be put. Like the title says, not very sexy but very important.

Highest and Best Use - Zoning and Value

Definition of Highest and Best Use: The reasonable, probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that result in the highest value.

Here is a real-world example: Several years ago I was approached by a homeowner looking to sell. They were in the process of interviewing several agents. I examined the property, did a market analysis, and assessed value at around $140,000. I shared my findings with the seller, and they said the other two agents came to the same conclusion.

The property was reasonably close to the main road and had a large barn. Because of these factors, I wanted to go back and check the zoning before finalizing my report. Sure enough, zoning allowed for commercial use. I shared this information with the seller and advised listing the property for $30,000 more. They liked that idea (of course) and chose me as their Realtor. That particular property sold in just over one week for the full asking price. The buyer had a specific need for a storage area, and it had to be zoned commercial - Highest and best use at work!

Don't Just Assume

Zoning ordinances can be extremely complex. Most municipalities have planning commissions, supervisors, and zoning hearing boards to create, evaluate, and oversee the zoning rules and regulations that govern. It is not unusual for individuals within these ranks to disagree on the interpretation of the zoning ordinances. There are intended uses, by right uses, special exception uses, etc. Each layer can be more ambiguous than the next.

I have seen people show up at township meetings upset because someone wants to build an apartment building across from their home. It is likely these disgruntled homeowners were never made aware of the zoning that existed and that building an apartment building was a by-right use. The question is, would they have purchased the home if they knew beforehand?

The Solution ~ Zoning Pro

If you are selling your home, a comprehensive zoning report could add value and peace of mind to both the buyer and seller.

If you are buying a home, it could be even more critical to understand what potential uses the property has. It is also essential to understand what can be done with adjoining properties as well. There is little worse than buying a home or property and not being able to enjoy it because you cannot use it for the purpose you intended.

Every article I write ends with the phrase "Knowledge is Power!" This statement could not be more valid as it relates to zoning. I have recently teamed up with a gentleman who has developed a cost-effective way of thoroughly researching the governing zoning ordinances for a property.

If you are buying or selling a home it is crucial you know what you are getting. I hope that the Zoning Pro Report can put the "Sexy" back in zoning! You now have an ally in the world of zoning. Call me for more details.

Knowledge is Power!

Jeffrey C. Hogue