THE FOLGER LIBRARY this week put three of its Capitol Hill properties on the market, asking a total of more than $750,000 for them, according to library business manager Richard Goodman.

Proceeds from the sale will be used to pay for renovation or restoration of the Folger's other residential properties in the same area, Goodman said, adding, "We are redeploying our assets."

The library owns 10 other buildings and another empty lot in the same area and plans to keep them, Goodman said. Several of the buildings have deteriorated in recent years, while funds went to projects considered more important. A library official said recently it would cost $1.5 million to rehabilitate the property, including the buildings now up for sale.

Some of the structures are used as offices and housing for scholars and others contain apartments rented for $300 or less, compared with prevailing rates of $450 to $650 a month or more on Capitol Hill. Library director Werner L. Gundersheimer said in March that Amherst College's directors, who govern the Folger, did not plan to sell any of the property.

Placed on the market with the Barbara Held Inc. brokerage this week, however, were a 13-unit apartment building, priced at about $475,000; a seven-bedroom rooming house, $225,000, and a vacant lot, priced at $80,000, all on East Capitol Street SE.

Early this year, Gundersheimer said the Folger Theater would be closed because deficits averaging $150,000 annually over 15 years were too high for the library's budget. The decision was reversed about six weeks later, after widespread protest against the closing. The Amherst directors agreed to give the theater $300,000 over the next two years, plus $260,000 to cover maintenance and upkeep of the theater.

Folger proposals in the past to tear down residential property and replace it with offices that would produce more income met with opposition from residents of the area. Don Denton, an area resident and president of the Capitol Hill Association of Merchants and Professionals, said this week the community would not object to the Folger plans, "as long as there is no attempt to level the property with the intent to make offices . . . . It would be to our advantage for someone to buy the property and pop a lot of money into it."

Goodman said the library began assembling the residential properties before 1970, but library records are "unclear as to why they were originally purchased." Former Folger director O. B. Hardison, who left the library last year, said some of the buildings were bought before he came to the library, and that others were purchased during his tenure because "I felt the library might need space for expansion" and for visiting scholars.

A 1973 Washington Post article, however, indicated Hardison wanted to put together a $10 million, six-story research center on property on the southeast corner of Third and East Capitol streets SE, across the street from the library. Eight Victorian town houses, purchased by the Folger between 1960 and 1973, would have been torn down to make way for the new cultural community envisioned by Hardison, according to the Post article.

The research center was never built, apparently for lack of money, though neighborhood opposition may also have been a factor. Over the years, various zoning changes sought by the library for the property were successfully opposed by neighbors. At one time, the library sought to use the vacant lot that is now for sale for a parking lot, and later it sought the "campus plan" zoning for all its holdings. Both proposals were denied by the District's Board of Zoning Adjustment.

A NEW CAR DEALERSHIP and several auto parts stores were approved for the Montgomery County Auto Park last week, on the condition that they adhere to an old set of neighborhood covenants that are no longer considered legally valid.

The covenants -- dealing with landscaping, parking and setbacks -- were written almost 20 years ago, when the auto park of a dozen dealerships was first proposed in Fairland. But over the years, they have been all but forgotten, say dealers at the site.

In the last year, however, neighborhood residents have dusted off the covenants, which county attorneys say are no longer legally valid because the entire area was rezoned several years ago. In any event, the covenants are set to expire in 18 months.

County planning board members have said that legal or not, the covenants should be acknowledged because they represent a promise to the neighborhood residents, said Rob Bushnell, a site plan enforcer for the county.

So, after considering the proposed developments last week, the board voted to impose a number of landscaping and parking conditions that will make the developments conform to the covenants.

Bushnell said the developers of a new car dealership on 8.1 acres on Automobile Boulevard and a Merchants Tire, Jiffy Lube and Sturdy Muffler on a 1.31-acre site down the road will all have to submit new site plans showing increased landscaping and will also be prohibited from parking cars on buffer zones.

"They seemed willing and the neighbors seemed pleased," he said. "It was a good way to do it without going to court to prove the legality of the covenants ."

A COMPLICATED PLAN to switch the zoning designations of two properties across the street from each other in Potomac Village was turned down last week by the Montgomery County planning board.

The owners of the Potomac Promenade shopping center on Falls Road had wanted to rezone 34,746 square feet of neighboring residential property to commercial in order to build a grocery store and additional parking for their mall, according to a staff report.

To avoid expanding the amount of land zoned commercial in Potomac Village, the developers then proposed to rezone 34,746 square feet of property directly across Falls Road from commercial to residential, the report stated. That land is now the site of an electric substation owned by Potomac Electric Power Co.

"The developers maintain that the Pepco site is not being used productively for local commercial uses, and therefore is a hindrance to the amount of commercial uses that could be developed in the village," the report states.

But the board rejected the proposal, saying there is enough commercial development in Potomac Village already, and that the area was last rezoned in 1981 under a comprehensive rezoning program.