Ethics of disclosing due diligence results?

Question

Hi there,

I was interested in buying a duplex in a cool beach community in Florida.  The property was being sold through an agent and was purchased by a wholesaler out of probate.

When I did my due diligence, the zoning office informed me the property was zoned SFR and had no license to be a duplex.  I  informed the agent that I was not going to make an offer because of the zoning issue.

I'm pretty sure that since I told the agent about the zoning issue, he now needs to disclose it to everybody.  My question is, was it ethical for me to inform the agent, or should I just have kept the issue to myself and not told him?

I've been doing this for 3 years, but am always trying to improve and could use your advice to navigate these potentially tricky waters.

Thanks!

Robert.

Jay M. · Answer

I'm on / near Cape Cod.  Land is scarce, scarce, scarce.  I routinely find lots for sale that are not buildable.  There are 3 at the moment on MLS that can't be built upon.  I always tell the agent after I speak with the building inspector and he tells me it's not buildable but the listing never goes away.  I guess they're looking for that one person who doesn't do their due diligence??

Kenneth Garrett · Answer

@Robert Lindsley

There are many properties that are legal non-conforming.  The old grandfather clause.  In other words, it was legal at one time the zoning changed and it can continue to operate until the non-conformity is lost.  Not sure if this is your case.  I like to FOIA (freedom of information) and request whether the property is compliant with city requirements.  Zoning, code violations, outstanding water/sewer bills, liens, etc.  I will then use that information and present my offer based on those facts.  Technically the broker is required to disclose those types of facts.  I’m fairly sure that doesn’t happen all the time.  I would recommend if you go that route you have something in writing from the city.

Good Luck.

John Warren · Answer

@Robert Lindsley there was definitely nothing wrong with you telling the agent that. Now whether or not the agent discloses a potential zoning issue could be interesting!

Robert Lindsley · Answer

Thanks for your thoughts!  I already have one property that's a zoning nightmare - I definitely don't need a second one lol.  It seems like a lot of people play fast and loose with zoning and it ends up hurting the next guy down the line.

I just checked and the property is gone.  I hope whoever bought it can make it work - hopefully this property isn't 'the one that got away.'

Ethics of disclosing due diligence results?

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