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What is Zoning Due Diligence?
Zoning due diligence is the process of reviewing a property’s compliance with local zoning laws to uncover issues that could impact its use, value, or financing.
Key Components:
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Zoning Verification: Confirms the property’s zoning designation and permitted uses.
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Zoning Compliance: Ensures adherence to zoning laws like setbacks, height limits, and floor area ratios.
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Violations: Identifies existing zoning violations or non-conformities.
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Future Changes: Assesses the potential impact of rezoning or future zoning changes.
Why It Matters for Fannie Mae and Freddie Mac
For properties financed through Fannie Mae and Freddie Mac, zoning due diligence is critical to ensure properties are legally compliant and pose no financial risk.
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Fannie Mae: Requires zoning verification to confirm legal compliance and mitigate foreclosure risks.
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Freddie Mac: Mandates a thorough zoning review to prevent violations that could jeopardize loan approval or property value.
ALTA Survey Standards:
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Table A, Requirement 6(a): Identification of current zoning classification and applicable ordinances.
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Table A, Requirement 6(b): Confirmation of compliance or identification of violations.
Benefits of Zoning Due Diligence
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Risk Mitigation: Identifies issues early to avoid legal or financial problems.
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Informed Decisions: Gives buyers, lenders, and investors clarity and confidence.
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Value Protection: Ensures compliance to maintain the property’s value.
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Financing Support: Simplifies loan approval by meeting lender requirements.