Home Buying in Chicago>Question Details

Shutterbug, Home Buyer in Chicago, IL

How does a property being zoned as B1 or B2 affect your financing? We already have a signed purchase agreement, the seller has not produced a cert of

Asked by Shutterbug, Chicago, IL Sun May 9, 2010

compliance. Our mortgage broker says it's a concern. (We'd be using it as a SFR)

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I asked my husband...he's a lender. He said "it should be of grave concern. If it is currently being used as a residential property but zoned B1 or B2, it likely has a variance for a legal, non-conforming use. If the property were to burn down, it would have to revert to it's original use (which would be B1 or B2). You would have to get another variance to use it as residential property again which could be difficult. If you can't get that variance, what would you do??? Maybe stop paying your mortgage on a property you can't live in anyway. So this is very risky for lenders. For this reason, lenders don't want to make residential loans on properties zoned for business."
Web Reference: http://www.footeteam.com
1 vote Thank Flag Link Mon May 10, 2010
You can research the zoning from the zoning map which is on-line.

This is the link to the zoning map: http://maps.cityofchicago.org/website/zoning/liability.html

Thiss is the link to the zoning ordinance: http://www.amlegal.com/nxt/gateway.dll/Illinois/chicagozonin…

The seller isn't required to produce a zoning cert on commercial property - only 1-4 unit residential properties. If the property is zoned commercial (which either B1 or B2 is) then I THOUGHT your financing would have to be at commercial rates and terms - which are not nearly as attractive as residential rates and terms. Hopefully your mortgage guy is knowledgable and knows what he's talking about?

Just so you know - B zoning is typically storefronts with apartments above them.

Hope that helps.
1 vote Thank Flag Link Mon May 10, 2010
You and your realtor should have done the research on this before entering into a purchase contract. How this affects your financing is dependent on whatever agreement or product you are purchasing from your lender. If you lender states this of grave concern, than it is.

Should you not be able to procure financing as a result then you can try to back out of your contract via the financing contingency, you'd have to talk to your lawyer about your options here as this is a legal issue. However, if you try to back out for this reason, the seller generally has the right to find you financing at similar terms of your current arrangement with your lender. If the seller is able to do so, you still may be bound to the contract.

Long story short, clarify with your lender what the problem is and then consult with your attorney. In the future make sure that you realtor looks into issues like this before entering into a contract.
0 votes Thank Flag Link Wed May 12, 2010
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