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Talking About Zoning with Buyers — Risks and Tips for Real Estate Licensees

Real estate licensees need to act with caution when it comes to talking about zoning with prospective buyers. What may seem like a casual chat can lead to a lawsuit if you inadvertently (or even accidentally) say the wrong thing. Of course, zoning is a complex issue. The way a property or piece of land is zoned dictates how it can be used, what type of development is permitted on the site, and what other restrictions are imposed on the property. As a real estate licensee, there are some pitfalls and risks to consider if you’re drawn into discussing zoning with prospects. You don’t want to find yourself facing a lawsuit for misrepresentation. 

Here are some of the common questions from prospective purchasers about zoning and tips for licensees to minimize the risk…

Common Questions From Buyers

It’s not unusual for prospective buyers to ask a real estate licensee zoning-related questions. For example:

  • Can I knock this house down and build apartments?
  • Can I use this property for commercial purposes? 
  • Can I buy this commercial property and use it as my residential home?
  • Can I park my tiny home on this block of land? 
  • Can I add a second floor to the property?
  • Can I just build a taller fence around the property for privacy purposes? 

Naturally, buyers are visualizing what they want to do with a property, and they may be curious about any zoning rules and restrictions. However, real estate licensees should take a risk management approach to engaging in any conversations about zoning. 

If selling the property on behalf of the owner, the real estate licensee will know whether it’s zoned residential or commercial. (As the listing agent, you will have verified the zoning with the seller in writing, along with any backup documentation the seller can provide.) When the zoning has been verified with the seller in writing and is a known fact, you can communicate that information to the prospective buyer. However, licensees should not get into discussions about the details, rules and restrictions relating to the zoning of the property.   Buyers should always be encouraged to do their own due diligence to verify the specifics directly. 

Sometimes prospects are interested in potential changes to zoning, asking questions such as:

  • Can I change the zoning for the property? 
  • What are the chances of zoning changes in the area? 
  • Do you know of any upcoming developments nearby or zoning changes?

Answering these questions is particularly dangerous territory; even if you know the answer and respond today, these issues are subject to change. It’s out of your control and the last thing you need is someone relying on your zoning advice only to find out later that it is incorrect. These are issues that buyers need to research and verify on their own.

Tips for Licensees to Minimize Risk

When faced with questions about zoning, consider these questions:

Do you have the facts and are you the best person to answer this zoning-related question? 

More often than not, the answer to this question will be no. Instead of trying to do your best to answer without all the facts and information, refer the buyer to the city or county zoning department to get the most up-to-date information available.  

Is answering this question going beyond the scope of my expertise? 

Real estate licensees have skills and expertise in real estate. You are not expected to be a zoning expert. Even if you do think you know ‘enough’ to respond to a buyer’s question, this can be problematic if your advice turns out to be incorrect. 

See: Why You Shouldn’t Exceed Your Scope of Work, a Guide for Real Estate Professionals.

Never presume

Zoning restrictions can vary greatly across communities. You might be selling what seems to be a similar property to something else you’ve encountered. You might think you know the answer to the buyer’s question. But, there’s no guarantee that the zoning rules are the same. Referring the buyer to the relevant zoning authorities is the best way to deal with zoning inquiries. 

Use disclaimers

If you mention any zoning information in your listing, advertising, or website, be sure you use a disclaimer. The disclaimer should state that the buyer should not rely on your representations about the zoning or use of the property. It should state that buyers should make their own independent inquiries about zoning before making a decision to purchase. See Everything You Should Know about Disclaimers in your Real Estate Business.

Check your insurance

Even an innocent mistake can lead to a lawsuit. Real estate licensees need to have an Errors and Omissions insurance policy to help defend a lawsuit should a claim arise. 

As part of one of the largest insurance brokers in the world, we have unparalleled access to more E&O options than just about anyone. 

With E&O + ClaimPrevent®, CRES members have access to qualified real estate attorneys to help prevent claims, not just defend them. Contact the team at CRES at 800-880-2747 for a confidential discussion today. Our team can customize an insurance policy to suit your individual needs.

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