Mortgages and setback violations

ronellisDecember 11, 2009

This is related to my question about the setback requirements on a lot I may purchase, which is discussed in the "Building and Setbacks" thread. In the subdivision there are unclear setback requirements for the lot - they are either 10' or 30' from the side street (it's a corner lot). This is a homeowner deed restriction, there is no county setback.

If, hypothetically, I decide to interpret the setback as 10' (as the title co and surveyor have) and build a house at that setback, will a future potential buyer face mortgage problems trying to buy the house?

Will mortgage companies finance existing homes that (may) violate deed restrictions? Will it show up as an exception on the title policy?

I have not decided to buy the property or build the house, and I have been consulting with an attorney on all of these issues. I'll also be asking my banker these mortgage questions, too. Thanks for your help.

assuming the risk of being sued by a neighbor

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jmagill_zn4

Think of it this way. If you knew ahead of time about these problems and the costs they caused would you have made an offer on this property.

    Bookmark   December 11, 2009 at 9:49AM
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Carol_from_ny

Corner lots are typically harder to resell than other lots. It's a privacy issue for many, a traffic issue for others.
The fact that you want to go thru the pain and hassle of building suggest to me that you are a bit of a fuss about what you expect from a house. I can not for the life of me imagine anyone that fussy about a home being happy on a corner lot.

    Bookmark   December 11, 2009 at 11:23AM
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dave_donhoff

Hi Ronellis,

will a future potential buyer face mortgage problems trying to buy the house?

There's no way of knowing in advance, for sure. It depends on the rigidity of the collateral guidelines of that lender, at that time... and also as to how much of a fuss the local jurisdiction makes.

Cheers,
Dave Donhoff
Leverage Planner

    Bookmark   December 11, 2009 at 1:21PM
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cmarlin20

Corner lots are typically harder to resell than other lots. It's a privacy issue for many, a traffic issue for others.
The fact that you want to go thru the pain and hassle of building suggest to me that you are a bit of a fuss about what you expect from a house. I can not for the life of me imagine anyone that fussy about a home being happy on a corner lot.

This is certainly not true everywhere. Corner lots are highly desirable in my area. South facing corner lots on the beach are by far the most valuable, they can sell for $2mil more than their neighbor inside lot. There is no car traffic. North facing corners are also highly sought after. Corner lots have more views and air space, privacy isn't much of an issue for people here or they wouldn't even be considering any lot.
BTW, I don't own a corner lot, wish I did.
Just saying corner lots can be a great buy.

    Bookmark   December 11, 2009 at 1:24PM
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calliope

It's poorly written ,isn't it? I've read it several times, and I think it could be interpreted either as a ten foot or 30 foot setback on the street of which you would not have a mailing address. And if I were a title mortgage company, I'd want to cover my butt too and interpret it as strictly as anyone could.

Who wrote the restrictions on this property, the municipality? Most of them have a solicitor, don't they? If it were me, I'd ask my attorney to get in touch with the solicitor of whatever entity prescribed the setbacks. I'd have him/her ask them to officially interpret that entity's intentions and put it into writing for you. I'd probably also want said solicitor to have it submitted before that entity's commissioners or council members so that they could co-sign their agreement with that interpretation.

If it precludes setting a house on it, you should have the ultimate answer and ammunition you need to present to the seller and their realty agents. If you chose not to back out with that information, then I think you can surmise whether you want to take the risks you may have to take.

If that was not the intention and the lot is build-able, then I'd have my attorney produce that same documentation to the banks/mortgage insurance companies and ask them to change their stance. What I would NOT DO, is take the advice of anyone who stands to gain by your purchase.....whether intentional or out of ignorance.

If you are going to see your attorney Monday, why don't you just stop worrying and put everything on hold until then? There may actually be a simple solution.

    Bookmark   December 11, 2009 at 4:04PM
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ronellis

The restrictions were written in 1961 by the original subdivider of the property. It's not in a city, and the county has no setbacks that apply. There are dozens of visible violations of the deed restrictions throughout the neighborhood. I think the chances of a neighbor suing are slim. BUT, if a bank isn't going to loan to a future buyer because my modifications are non-compliant, then that is a bigger problem.

    Bookmark   December 11, 2009 at 6:13PM
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calliope

The restrictions were written in 1961 by the original subdivider of the property.

Ok, that information wasn't in an earlier description. I know a piece of local property in our area has some restrictions made by the seller who developed some farmland..... but they did it only because the county forced them to. LOL So those restrictions are traceable to county regulations. In your case, it was probably done by the developer to make his lots more attractive to buyers.

Hope you get some answers Monday, but those conditions would certainly not make me want to buy something with that hanging over its head.

    Bookmark   December 12, 2009 at 10:58AM
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brickeyee

Most places have methods for getting zoning variances, and a similar procedure is often in place to have deed restrictions modified.

At some point the lack of legal action to enforce a violation of a deed restriction often becomes grandfathered and the violation is moot.

    Bookmark   December 12, 2009 at 2:08PM
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chrisk327

My guess, not from experience yet...

If the house can be built complying with local building and setback restrictions and past any neighbor objecting, I doubt you'll have a problem reselling based upon a deed restriction if their are plenty of other houses with the same problem.

However, thats not to say that it couldn't come back to bite you, but basically if the title report is "ok" ie you hafe title, and the structure has proper COs I don't think the bank studies the deed vs the house if permits etc are in place. but again, I'm no expert or could be wrong.

    Bookmark   December 14, 2009 at 2:27PM
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sylviatexas1

I've been witness to a couple of disputes over deed restrictions, & you can't use reason to figure out what'll happen.

Here, since deed restrictions aren't criminal & don't have anything to do with city code, you have to file suit to enforce the restrictions, &
1.
you don't want to have neighbors suing each other. As someone said on another thread, it's the opposite of cozy.
2.
there's no way to predict what neighbors, or the court, will do.

I've had neighbors lose the case when they believed the homeowner's story that the huge metal building was going to be a hobby woodworking shop & discovered after it was built that it was a commercial cabinet shop with workers parking 15 cars onsite, noise at all hours, & big delivery trucks coming & going all the time.

why?

because they didn't stop the property owner until he'd already spent all that money, poor guy!

& I've seen neighbors file suit & win against their neighbor who kept horses on her acreage property even though there were single-wide trailers in the subdivision, violating restrictions.

the reason?

The horse owner bought in an existing subdivision & knew the restrictions.

& she lost her suit to have the single-wides removed because they had been there when she bought her property.

    Bookmark   December 15, 2009 at 6:20PM
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