Real Estate Talk:
Selling a country home
Tips and steps in selling a second residence
By Joseph Marovitch
June 26, 2024
Before the pandemic, second homes, by a lake or on a mountain, were considered a sanctuary where people could escape the grind and pavement of the city. This changed during the pandemic, and it is important to understand the current market when selling.
During the height of the pandemic, populated cities were rife with COVID-19 cases. There were thousands of infected and thousands of fatalities. Everyone wore a mask, and the government had citizens remain home after 6 pm to avoid infection. During this time, country homes changed from second residences to primary residences. Many people decided to escape the carnage of the city for the safety of less populated areas. Suddenly the demand for country homes as primary residences skyrocketed and supply was limited. Everything in the Laurentians and Eastern Townships sold and the prices increased way above the pre-pandemic market. Buyers purchased without inspection or other, if any, conditions since they were competing with so many buyers. Buyers were also obtaining mortgage rates of 1.5% to 2.5%, which permitted those who could not afford a country home before to afford one now.
Before the pandemic, second homes… were considered a sanctuary where people could escape the grind and pavement of the city. This changed during the pandemic, and it is important to understand the current market when selling.
A year after the pandemic panned out, there was, and is, a movement by those buyers to move back to the city. Therefore, we are seeing more supply of second residences on the market. Some are selling their second homes because they want to be back in the city. Others are selling because, now that rates are much higher as is inflation, they must sell their property. Then, some sell for regular reasons of life changes, such as a new job, employment relocation, using the funds for another project or the next stage of life or they just prefer not to have the expenses anymore.
The second residence selling process
Buyers of second homes generally have certain goals. They want a property they can escape to and refresh. Peace and quiet are important but so are social and physical events like skiing, swimming and occasional parties. Most prefer a property unlike their primary residence – a place where they can relax and place their feet up, a house that requires little effort, a place they can arrive at on a Friday evening, open a bottle of wine and snack on a plate of shrimps by the fireplace or under the stars. Preparation to sell is slightly different than a primary or city home.
A property that is not perfectly presented but is surrounded by mountains and/or a lake will not stop a buyer from purchasing since those are the major criteria they want, along with peace and quiet.
‘In the country second residence market, homes are usually far apart and different in nature, therefore, the price range for the home will be wider than in the city.’
More structural issues will have an effect on the buyer such as a rotted foundation or balcony, non-drinkable water or faulty septic tank, and issues that could be a problem in the future, such as too many bedrooms for the size of the septic system. These are issues that must be considered when pricing the property or must be remedied before selling. Last but not least is the interior condition. If the bathrooms, kitchen or bedrooms are dated as compared to other properties in the area, this will affect the price. However, unlike a city home, buyers have many different tastes and reasons for purchasing, therefore the seller just requires the right buyer.
In the city, it is not as difficult to find comparable listings to assist in determining the price of the seller’s home. In the country second residence market, homes are usually far apart and different in nature, therefore, the price range for the home will be wider than in the city. Where one buyer may pay $450,000 for a property by the lake, another may pay $950,000 because it is what they want.
Between buyer demand, current market condition and recently sold (not necessarily comparable), is where the property is priced, not too low, not extremely high, but within a range flexible enough to meet different buyer expectations.
Selling with a broker
Country homes require large and targeted exposure both national and international to sell. This is because only a small percentage of the population can afford a second home and the best way to reach a large, varied and qualified demography of buyers is to have a vetted and qualified network of potential buyers through targeted ads in local and international papers such as the Rob Report, New York Times and others. Those who live elsewhere also have desires to own in Canada and have friends who live within the area of Montreal and Toronto, therefore, referrals are a very useful tool.
‘Country homes require large and targeted exposure both national and international to sell. This is because only a small percentage of the population can afford a second home…’
Brokers provide maximum exposure via their network of brokers, buyers, the Centris system, ads, emails, networking and newsletters. The more exposure a property has, the more the property will sell for. Ample and quality exposure creates more calls, visits and offers.
There are certain preparations that sellers should perform before listing because these are items that buyers will require during their due diligence:
- If the certificate of location is more than seven years old, prepare a new one since the bank will not accept an old certificate.
. - If the certificate is less than seven years old but, in that time, structural changes took place in the house, or the cadastre numbers and bylaws have been changed, purchase a new one.
.. - Homes in most municipalities require that the septic tank be cleaned every four years, and this will be required by the buyer before the possession date.
. - The drinking water in the house should be tested as should the well the drinking water comes from.
. - If there is a fireplace, the fireplace must be inspected and cleaned annually. If this has not been performed, then do it.
Test for drinking well and lake water, fireplace inspection and septic cleaning will have to be performed either before listing or after an accepted offer. However, these tests can cause delays if performed after an accepted offer and delay the signing at the notary. Therefore, it is best to perform these tests either before or during the beginning of the marketing campaign.
‘Brokers provide maximum exposure via their network of brokers, buyers, the Centris system, ads, emails, networking and newsletters.’
The broker selling the property should be aware of the existing bylaws if the property is by a lake. If the buyers are not informed of bylaws such as no motorboats, that the foliage within 50 metres of the lakeshore cannot be cut, or that there is no bathing in the lake, this can lead to the buyer acquiring a hefty fine which could come back at the seller and the broker.
Tips to sell the country home
- Keep the property tidy and properly staged.
. - Cosmetically upgrade if you must or price for dated homes and any structural issues that the buyer must address immediately.
. - A pre-inspection is not a must but may be very helpful. This is because, if all detectable issues are declared in the seller’s declaration, which must be signed by the buyer and provided with the promise to purchase, the buyer cannot use these issues to renegotiate the offer price.
. - Brokers are supposed to use their selling skills to sell the property and their negotiation skills to acquire the best price and conditions. Therefore, the broker should not be using a lockbox. A lockbox is used frequently in the country and is a device that permits the buyer’s broker to open and show the house without the seller’s broker on site.
Steps to sell a second residence once the price is determined
- Pictures are taken – Great pictures do tell a thousand words and help find the buyer.
. - Drones are an excellent tool to show the property and surrounding countryside
. - Measurements are taken – Measurement of each room must be accurate, or the sale can be cancelled after signing. If the buyer determines a room is 8 by 12 instead of 12 by 20, this is enough to reverse a sale.
. - A for sale sign is placed in front of and on the lake side of the property – This attracts buyers and brokers and makes it much easier for buyers to find the property.
. - Property is placed on the Centris system with verified measurements and descriptions
. - Property is entered on multiple websites including the Centris system, the broker’s company websites (national and international) and the broker’s personal website if they have one.
. - The broker will email their client and broker base one or more times per month.
. - Flyers will be distributed in targeted areas where potential and qualified buyers live.
. - Targeted ads are placed in the local and international papers, and specific magazines such as the Rob Report, depending on the price and type of property being sold, for two or more times per month. Once per month, the broker will provide a report indicating how many calls, visits and offers have taken place. The report will include how many ads were placed and where.
The broker should qualify buyers, if possible, by asking for a letter of pre-approval or proof of cash to be accompanied by an offer. Once an offer is received, the broker will review the conditions and deadlines and discuss with you whether to accept, refuse or counter the offer.
Offers usually come with two or more conditions and sometimes with no conditions. The most common conditions are inspection and financing. Know that the most difficult part of selling a property is not the marketing but rather getting from accepted offer to signing. An experienced broker will handle an inspection with issues by negotiation, and will know a valid issue from a buyer who is simply attempting to get a lower price.
Once the inspection and financing conditions are satisfied, the balance of hurdles lies with the notary, who checks title and servitudes. After that, signing takes place, the property is registered with the new owner and a day later the money is in your account and the property is fully sold.
‘Know that the most difficult part of selling a property is not the marketing but rather getting from accepted offer to signing.’
Finally, the tax implication. In Canada, a primary residence upon selling, is tax-free. Yes, you keep it all. A second residence is considered a luxury item and is therefore not tax-free. Upon selling a second residence, any gain is considered a capital gain and is taxed on 50% of the gain. If you paid $100,000 for the country home and later, sold the property for $150,000, you would be taxed on 50% of the gain or on $25,000. The tax you must pay is dependent upon your income, therefore it is always a good idea to purchase the second home and place it in the name of the person in your household who has the least income, paying less tax.
Should you have questions or comments, please refer to the comments section at the bottom of the page. As well, to view past articles, click here.
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Joseph Marovitch has worked in the service industry for over 30 years. His first career was working with families from Westmount and surrounding areas, hosting children between the ages of 6 to 16 as the owner and director of Camp Maromac, a sports and arts sleep-away summer camp established in 1968. Using the same strengths caring for the families, such as reliability, integrity, honesty and a deep sense of protecting the interests of those he is responsible for, Joseph applies this to his present real estate broker career. Should you have questions please feel free to contact Joseph Marovitch at 514 825-8771, or josephmarovitch@gmail.com
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