Buy & Sell Recreational Property in Canada

INTRODUCTION xvii PART 1 - PREPARING TO BUY RECREATIONAL PROPERTY 1 1 SEARCHING FOR THAT PERFECT RECREATIONAL HOME 3 Where Do You Start? 3 Factors to Consider When Looking for a Recreational Home 4 Community 4 Neighbourhood 4 Privacy 4 Preferred activities 5 Accessibility 5 Seasonal or year-round property 5 Maintenance 5 Strata or condominium restrictions 6 Zoning 6 New-home warranties 7 Homes Directly for Sale by the Owner 8 2 TYPES OF RECREATIONAL PROPERTIES AND TYPES OF OWNERSHIP 9 Cottages and Summer Cabins 9 Floating Homes 9 v CONTENTS k vi Buy & sell recreational property in Canada Condominiums 10 Ski-in/Ski-out Condominiums 11 Ski Chalets and Winter Cabins 11 Mobile Homes, Mobile-Home Parks, and Land-Lease Communities 11 Hunting Cabins 12 Ranch and Farm Recreational Homes 12 Title and Ownership 12 Freehold 12 Leasehold 13 Strata title 13 Co-operative 13 Co-ownership 13 3 ASSEMBLING YOUR TEAM OF PROFESSIONALS 17 Real Estate Agent 17 Responsibilities of your agent 17 The exclusive buyer's agent contract 18 Who pays the agent's commission? 18 What do agents do to earn their commission? 21 Are agents allowed to receive bonuses or other gifts from financial institutions? 21 How do you choose an agent when buying a recreational property? 21 Do agents provide referrals to other professionals? 21 The Difference between a Lawyer and a Notary Public 22 Choosing a lawyer or notary public 22 The role of the lawyer or notary public 22 Recreational-Home Inspectors 23 Environmental Experts 23 Protecting Your Legal Interest 23 Title insurance 24 4 FINANCING 25 How Do You Get Financing for a Recreational Property? 25 What Are the Types of Mortgage Loans? 25 Conventional mortgage 25 High-ratio mortgage 26 Insured mortgage 26 Assumable mortgage 26 Condominium mortgage 26 Open mortgage 26 Closed mortgage 26 Contents vii Vendor take-back (VTB) mortgage 26 Portable mortgage 27 Reverse mortgage 27 Blanket mortgage 27 Vacation property mortgage 27 Mortgage Insurance 28 Mortgage default insurance 28 Mortgage Interest Rate 28 Mortgages for Vacant Land 28 How Much Down Payment Do You Need? 28 Appraisals 29 The Documents the Lender Will Require 29 5 OWNERSHIP AND TAXATION 31 GST/HST 31 Property/Land Transfer Tax (British Columbia and Ontario) 31 Property Classes 32 Property Tax Assessment 32 Who pays for the property taxes of the current year? 32 6 LAND AND WATER ISSUES 33 Maps 33 Forest recreation map 33 Topographic map 33 Plan 34 Agricultural land reserve map (BC) 34 Surveys and Survey Certificates 34 Hiring a surveyor 34 Survey notes 34 Geotechnical survey 34 Land Issues 34 Land title search 34 Setback 35 Access roads 35 Buying acreage or vacant land 35 Profit à prendre 36 Mineral rights 36 First Nations lands 36 Water Issues 36 Waste management systems 36 viii Buy & sell recreational property in Canada Water supply 37 Flood plains 38 Marine (submerged) cables 38 Shorelines properties 39 Wetlands 40 Legislation and regulatory bodies 40 7 BUYER BEWARE! 43 Protect Yourself from a "Leaky Condo" 43 What is a special assessment? 44 Beware of Buying a Former "Grow House" 44 Mould Issues 45 Precautions When Using Wood Heating 45 Potential Problems with Oil Tanks 46 How can you know whether an underground oil tank is leaking? 46 Provincial and territorial standards for oil tanks 46 Electric Wiring Issues 46 8 BUILDING A RECREATIONAL HOME, AND OTHER OPTIONS 49 Can You Build on Your Property? 49 Location 50 Estimating Costs 50 Financing 51 The Builder 51 Finding and hiring a builder 51 Communicating with your builder 51 Overseeing the progress 52 Preparing the Land 52 Power and telephone lines 52 Water and sewage 52 Building Inspectors and Municipal Inspectors 52 Alternatives to Building a Recreational Home 53 Prefab homes 53 Camping on your land 53 9 BUYING RECREATIONAL PROPERTY AS AN INVESTMENT 55 Determining Investment Potential 55 The Importance of Location 56 Accessibility 56 Exposure through events and films 56 Contents ix Recreational activities 56 Increasing the Property Value 56 10 NON-RESIDENTS: BUYING AND SELLING RECREATIONAL PROPERTY 59 Can Non-Residents Buy Real Estate in Canada? 59 Canadian currency 59 Can non-residents obtain financing to purchase recreational property? 59 Down payment 60 Residents of the United States 60 Can a Non-Resident Reside in Canada, and for How Long? 60 Taxes 60 Residence status and income tax 60 Important Information for a Non-Resident Selling a Recreational Home 61 PART 2 - PROCEEDING WITH THE PURCHASE 63 11 MAKING AN OFFER 65 What to Look for When Viewing Properties 65 Seller's motivation 65 Prior offers 65 Property condition 66 What Should the Offer to Purchase Include? 67 Competing or Multiple Offers 67 Evaluating Recreational-Home Prices 70 How sellers price their homes 70 Comparative Market Analysis 70 Comparing unique properties 71 12 REMOVING SUBJECTS 73 Subject Clauses 73 Why do you include subject clauses in the contract? 73 The most common subject clauses 74 What does it mean to remove subjects? 74 How long do you have to remove subjects? 74 Recreational-Home Inspections 75 What should an inspection include? 75 Cottage inspection 75 Condominium inspection 75 Single-detached home inspection 76 What if you don't want to have an inspection done? 76 Can you get a relative or friend to do the inspection? 77 x Buy & sell recreational property in Canada An inspection for a remodelled property 77 The cost of the recreational-home inspection 77 Can the agent pay for the recreational-home inspection? 77 When the home inspection fails 77 Removal of All Subjects before the Subject Removal Date 78 The Deposit 78 What if the deposit cheque is NSF? 78 Where does the deposit go? 78 13 CLOSING COSTS FOR BUYERS 81 What Happens at Completion? 81 Title insurance 82 Fire and liability insurance 83 Additional Closing Costs 83 Adjustment costs 83 Transaction levy 84 Appraisal fee 84 Survey certificate 84 New home fees 84 Legal fees 84 Homeowner's insurance 84 PART 3 - SELLING YOUR RECREATIONAL PROPERTY 87 14 WHAT IS YOUR RECREATIONAL HOME WORTH? 89 Why Are You Selling? 89 How Do You Know What Your Recreational Home Is Worth? 89 Comparative Market Analysis (CMA) 90 Pricing land only 90 Increasing or Decreasing Your Price 90 15 GATHERING DATA AND LEGAL DOCUMENTATION 93 Title Search 94 Survey Certificate 94 Property Condition Disclosure Statement (PCDS) 94 Oil Tank Removal 95 Zoning Information 95 Municipal Assessment 96 Restrictions 96 Other information for strata property 96 Other Documentation 96 Contents xi Measuring Your Property 97 Pre-Sale Building Inspection 97 16 SELLING ON YOUR OWN OR WITH A REAL ESTATE AGENT 101 What Are the Costs of Selling a Recreational Home? 101 Do You Have What It Takes to Sell Your Own Recreational Home? 102 What Are the Pitfalls of Selling without an Agent? 102 What Are the Benefits of Selling with an Agent? 103 Choosing the right selling agent for your recreational property 103 Agents specializing in rural land 104 Types of Listings 104 Open listing 104 Exclusive listing 104 Multiple Listing Service 104 The Listing Agreement 105 Responsibilities of Listing Agents 105 The agent's commission 108 17 MARKETING YOUR RECREATIONAL HOME 109 What Do You Do to Market a Property? 109 Print advertising and websites 109 Signage and tools of the trade 110 Marketing to friends, relatives, and neighbours 110 Advertising 110 18 SHOWING YOUR RECREATIONAL HOME 113 Showing Made Simple 113 Providing access to a recreational home 113 Open Houses and Agent Tours 114 Dos 114 Don'ts 115 Protecting Yourself 116 19 THE OFFER 117 Separating Qualified Buyers from the Lookers 117 Who Can Be Legally Bound to a Contract? 118 When You Receive an Offer 118 Condition precedents 118 Multiple offers 118 Lowball offers 119 Negotiating a Sale 119 xii Buy & sell recreational property in Canada What to negotiate 120 Selling your furniture 120 When You Reach an Agreement 120 What if the recreational home does not pass inspection? 121 Showing after Accepting an Offer 121 When Condition Precedents Are Met 121 Suspicious Transactions 121 20 CLOSING, COMPLETION DATE, AND POSSESSION 125 The Closing Procedure 125 What Happens at Completion? 126 Reimbursement of property taxes 126 Capital gains tax 126 Completion must be done on a weekday 126 Possession 127 When do you hand over the keys? 127 What should you leave behind on possession day? 127 What should you not leave behind? 127 Doing a walk-through with the buyer or buyer's agent 128 A special touch 128 APPENDIX: COTTAGE ASSOCIATIONS IN CANADA 129 GLOSSARY 133 CHECKLISTS 1 Gathering the documents for the lender 29 2 Subject removal 79 3 Documents and information 98 4 The contract 123 SAMPLES 1 Buyer-agent fee agreement 19 2 Commission agreement 20 3 Property condition disclosure statement 68 4 Listing agreement 106