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When The Seller Has No Idea

When The Seller Has No Idea

Update: 2021-04-19
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On today’s show we’re talking about how to negotiate with a seller who has no idea what is permitted on their property.


There are numerous examples of properties that exist for historical reasons, but don’t comply with new zoning regulations.


For example, new zoning regulations may have a minimum lot size, or perhaps new setback requirements. As long as you keep the existing structure within the existing envelope, you’re entitled to maintain the existing improvements.


But as soon as you demolish the existing structure and attempt to build something new, then the new rules apply. In that case, you could be destroying significant value and ultimately render a parcel of land useless.


I was speaking with the owner of a property this week and he didn’t know the zoning of his property. His property was below the minimum lot size and the existing house did not meet the minimum setbacks to the back property line, or the side property line. The property has no municipal services and would be too small to have both a water well and a septic system. A septic system requires about a 49 foot spacing between a water well and a septic system. It also requires the septic system be located 10 feet from the property line. Put all of this together and you have constraints that can no longer be met on the existing property.


If his septic system needs to be replaced, the new permit will require compliance with the existing code. But if you don’t have enough land to comply, you have a problem. There is a paradox that cannot be satisfied on the existing property. You will need to somehow expand the property, or find a way to connect to municipal services. The property just became unusable and its value dropped like a stone.


All too often, the existing home owner doesn’t understand these risks. They often don’t even know the zoning attached to their property. After all, why would they? The property has been in their family for generations. Their grandparents lived there. Their parents lived there. They spent summers there as a child.


Nobody ever discussed zoning rules. There would be no reason to. Over the years, the zoning code was updated and the owners would have not even have been notified. Unless there was an act of condemnation, the seller of the property would have no idea what the current zoning restrictions would mean for their own property.


In the old days, homes were built very close to the road. This was for practical reasons. Cars didn’t exist. Snow would have been a problem in the winter months, so a large setback from the road would have been reserved for only the wealthiest of property owners with an estate.


As roads were built to accommodate cars, they were widened to deal with increased traffic levels and the setback to the front door of the house would have shrunk as more and more cars dominated daily life.


These older homes built on stone foundations would never have contemplated what the future would bring.


I’m currently in discussion with the seller of another property. They believe that a significant subdivision can be built on that land. If the zoning can be changed, then that’s true. But the final number of units will be limited by the the access to the major arterial road immediately in from t of the property. The seller can’t be an expert on what will be permitted. It’s not their field of expertise, and they have not attempted to get the kind of zoning density that a developer would want in a parcel of that size.


Nevertheless, the seller and their agent speak with tremendous confidence about what can be built on the property.


The agent aims to convince the buyer that they have the knowledge and that’s all the buyer should need. No need to worry. Zoning changes are done all the time and they’re completely routine, right?

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When The Seller Has No Idea

When The Seller Has No Idea

Victor Menasce