Tag: cottage real estate agent

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What information are cottage sellers required to disclose to buyers?

Photo by Mircea Costina/Shutterstock

A small beach house in Bayfield, Ont. overlooking Lake Huron has become the focal point of a $2.2 million lawsuit, according to the CBC.

Michael Bousfield and Leah Stumpf, a couple from Guelph, Ont., were in the process of purchasing their dream vacation home when the seller told them three days before closing the deal that the property was uninhabitable due to an eroding shoreline. Having already arranged their financing, the couple was forced to proceed with the purchase and has since launched a lawsuit against the seller, as well as the Ausable Bayfield Conservation Authority (ABCA) and the municipality of Central Huron, after the two governing bodies wouldn’t issue a permit to fix the shoreline without the couple paying for a coastal engineering report.

The case will be heard in a Toronto courthouse.

Negotiating real estate deals can be tricky. As it turns out, sellers aren’t legally required to tell you everything about a property. To avoid any legal troubles, here’s everything you should be aware of when you’re looking at a cottage and whether the sellers are required to declare it.

Patent defects

Roof leaks, foundation cracks, and window breaks. According to the Real Estate Council of Ontario (RECO), a patent defect is any visible issue with a property. They’re easy to spot—this could be a stain on the ceiling from water damage or a missing safety rail. Due to their visibility, the seller is not required to disclose these defects. To ensure you don’t miss any patent defects, RECO advises that you ask the seller and their realtor specific questions about the state of the property, and hire a home inspector to have a thorough look.

Latent defects

These issues are harder to see, so hard that even a home inspector might miss them. They’re the kinds of things that only the seller would know about, such as a basement that floods each spring, a quickly eroding shoreline, or any hidden damage or mould. Sellers are required to disclose this information to buyers. “If a seller is aware of such a defect and doesn’t disclose it, they can be exposed to a lawsuit by the buyer,” RECO says. The latent defect must be disclosed before the buyer enters a contract of purchase. If the buyer discovers a latent defect after purchasing the property that wasn’t disclosed by the seller, they have two years from the day the defect was discovered to launch a lawsuit.

Stigmas

Stigmas don’t affect the property’s appearance or structure. Instead, they’re past events that could cause the buyer to rethink their purchase. For instance: a murder on the property, an illegal grow-op, a notorious individual who lived there, or even rumours about the property being haunted. Since some buyers may be more comfortable with these stigmas than others, the seller is not required to disclose this information unless it affects the price of the property. The onus to uncover any stigmas falls on the buyer and their realtor. RECO recommends asking the seller and their realtor direct questions about the history of the property, researching it online, and speaking to neighbours.

Seller Property Information Statement (SPIS)

When looking at a property, the buyer can request a SPIS from the seller. This is a form filled out by the seller that outlines all of the potential defects and damages they’re aware of on the property. It’s a good way to get an overview of any problems you should be looking for. However, an SPIS is voluntary. A seller is not required to fill one out. RECO emphasizes that real estate transactions operate on a “buyer beware” system. In most cases, it’s up to the buyer and their realtor to uncover a property’s flaws. If a seller is unwilling to provide a SPIS, the buyer should have the home inspected by a professional and ask specific questions about the state of the property before entering a contract of purchase. Sellers are legally required to tell the truth if asked about their property.

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Cottage Life

Demand for Ottawa-area cottages slows, prices remain high

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Much like the rest of Ontario, the Ottawa Valley’s cottage real estate market experienced a surge in activity during the COVID-19 pandemic. But experts say the area is now starting to feel the comedown.

“In our market, we saw a 30 per cent increase in pricing during COVID,” says Erin Phillips, a realtor in the Ottawa area whose team specializes in waterfront properties. “Our demand was through the roof. But it’s actually starting to slow down a little bit. We’re getting a little more inventory and a little bit more of a balanced market.”

Demand in the area started to slow in July, says Phillips. This means that bidding wars, which contributed to driving prices over asking, have become rare, and cottages are staying on the market for longer. In March, cottages were snapped up within two days of going on the market. Now, the closing period for a cottage hovers around 30 days, says Phillips.

“During COVID, you had no time to sit and take it in. And cottage country is hard in our market because it’s pretty spread out around here…To get out and see them all you had to jump on it the minute it came up,” she says. “Now we’re getting a little bit more time on the market.”

Hiked interest rates have played a role in the slowed demand. The Bank of Canada raised its key interest rate to 2.5 per cent in July in an effort to combat runaway inflation. Higher mortgage rates and concerns over a coming recession have caused many to delay their dream of owning a cottage.

This ebb in demand has allowed the Ottawa cottage real estate market to start balancing out, shifting some power back to the buyers. Once again, buyers can include conditions, such as a home inspection, in their offers without worrying about it impacting the competitiveness of their bid, Phillips says.

Another factor slowing demand in Ottawa is cottage prices. Despite interest rates continuing to rise, cottage prices in the Ottawa area have remained high. Along the Rideau Canal system, one of Ottawa’s most desirable cottage markets, there are two price pockets, says Phillips. The first pocket averages around $1 million, and the second pocket is $2 million and up. The difference between the two price pockets is the amenities.

“Boathouses, outbuildings, number of bedrooms, waterfront exposure, etc.,” she says.

A number of the buyers showing interest in these high-end cottages are from Toronto, Phillips says. Specifically, individuals who’ve been priced out of markets closer to home, such as Muskoka.

Despite the inflated prices and interest from outside buyers, there are still affordable cottages in the Ottawa area. For those with a budget under $1 million, Phillips suggests looking at the Ottawa River and some of the smaller surrounding lakes in the Ottawa Valley.

But if you’re serious about buying a cottage near Ottawa, Phillips suggests doing it now. “I think come next spring, we’ll be back to a normal market with a bit of an increase [in demand] again, so I think the time to buy would be now to December.”

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Cottage Life

Cottage prices remain high despite rising interest rates: RE/MAX

Photo by Shutterstock/Elena Elisseeva

There’s been a lot of talk about recessions lately. With Canada’s inflation rate hitting 8.1 per cent in June, the largest yearly increase since January 1983, the Bank of Canada is driving up interest rates in an attempt to curb consumer spending and get supply and demand back into the same ballpark.

Real estate—cottages in particular—was expected to be one of the first industries hit by the bank’s tightened purse strings. Yet, a report from real estate company RE/MAX shows that cottage prices are remaining strong throughout Canada, with many regions still seeing price increases.

In 2021, the aggregate price of a cottage in Canada jumped 21.5 per cent to $567,000, according to Royal LePage. This was mostly due to the pandemic. Domestic, rural properties skyrocketed in popularity as people looked to escape urban centres and businesses transitioned to remote work. But even in 2022, when COVID-19 has become a part of our everyday lives, and many businesses are reintroducing in-office work, cottage prices remain high.

Here are the year-over-year recreational prices as of May 2022:

  • Kawartha Lakes, Ont.’s median residential property price rose by 30.4 per cent to $806,000.
  • Georgian Bay, Ont.’s benchmark single-family home price rose by 17 per cent to $804,800.
  • Powell River Sunshine Coast, B.C.’s average price of homes sold rose by 43.3 per cent to $677,950.
  • Prince Edward Island’s average price of homes sold rose by 20.9 per cent to $405,686.

Despite these increases, cottage prices aren’t skyrocketing the way they were during the pandemic. This is largely due to a decrease in overall sales volume. “You can really see the cut-off at about the end of May in my market,” says Bryan Coxworth, a real estate broker with Sotheby’s International Realty who operates out of Muskoka and Georgian Bay. “April and May I was still getting competing offers on pretty much everything I was selling. And then it kind of abruptly ended right at the end of May, and the market really slowed down through June and much of July.”

As of August, Coxworth has noticed people start to re-enter the cottage real estate market. This week, he sold a waterfront property within 95 per cent of its listed price. “That’s average. That’s where things typically sell if you look at 20 years of history,” he says. “COVID skewed those numbers. But I think where we are now is we’re back to a more normal market.”

A decrease in sales volume means that offers are no longer being driven above the asking price by bidding wars—an occurrence unique to COVID in cottage country, Coxworth says. But prices aren’t going down either. Stable internet and the ability to work from cottage country have ensured that there is still a demand for cottages according to RE/MAX.

But demand has waned compared to 2020 and 2021, especially when you look at the number of available cottages on the market. “During COVID, I was running two to three listings and they’d all sell within two weeks, so you never built up any inventory,” Coxworth says. Pre-pandemic, Coxworth managed 20 to 30 listings at one time. Now, he’s juggling around 14.

“In my mind, we’re not back to the number of listings that we’d seen through 2017, 2018, and 2019. We’re not up to that level of listings. Although, I can see it increasing, and I think it will continue to increase.”

With fewer competing offers and more supply, transactional power has started to shift back to the buyer. Previously, with bidding wars, buyers were often forced to pay over the asking price and didn’t have the luxury of including conditions with the sale. But that’s changing.

“Now, a buyer has an opportunity to come out, negotiate a little bit on the price, and protect themselves with the appropriate conditions on financing and a home inspection,” Coxworth says.

Without as many competing offers, buyers also have time to step away and think about the purchase. Whereas during COVID, if you didn’t act immediately, the cottage was gone, Coxworth says.

“If I were a buyer, this would be the time I’d be wanting to buy because I have more control over the situation now than I did a year ago. Far more control.”

Experts at RE/MAX say it’s unlikely cottage prices will ever return to pre-pandemic levels, but they may start to stabilize.

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CREA announces pilot project that will show buyers bids in real-time

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The Canadian Real Estate Association (CREA) is launching a pilot project that will allow buyers to see registered offers placed on a property as they are submitted.

In partnership with Australian software company Openn Negotiation, CREA, which is in charge of setting national standards for Canadian realtors, has created Openn Offers; a management software that will track real estate offers in real-time, displaying them on a property’s REALTOR.ca listing.

The goal of Openn Offers is to increase transparency and provide buyers with more information when purchasing a property, says Pierre Leduc, media relations spokesperson for CREA. The project is still in the planning process, but Leduc says the association’s aim is to test Openn Offers in select markets across Canada this summer.

Which markets will be selected is still up in the air. Since Canadian real estate is governed at a provincial level each province has its own rules around how a real estate transaction is conducted and what information is allowed to be disclosed. CREA is currently in talks with 11 real estate regulators across the country to determine how Openn Offers will operate in each province.

“Our first step is to define the provincial [regulations] that actually allow this project to be more transparent,” Leduc says. “Then it’s finding boards within the province that are willing to host.”

If Ontario is selected as a host, Leduc says that at a minimum, Openn Offers will show buyers how many offers have been made on a property and what the highest offer is. A recent announcement made by the Ontario government could expand these parameters, though. As of April 1, 2023, sellers in Ontario will have the option to disclose offer amounts in a multi-offer scenario. This option will be voluntary, but it could give buyers a sense of where they rank among the bids and ensure they don’t overpay for the property. This feature wouldn’t kick in on Openn Offers until next year.

Leduc adds that for an offer to be recognized by Open Offers, the buyer needs to be working with a licensed realtor who can process their bid through the system.

CREA’s announcement came only a week after the federal government released its 2022 Budget, in which the feds pledged to eliminate blind bidding from real estate transactions in an effort to make housing prices more affordable.

Blind bidding is the default practice used by real estate agents across Canada in multi-offer scenarios. It requires buyers to bid for a property without knowing the amout of competing offers—a common scenario seen in Ontario’s cottage country over the last two years. The crackdown on blind bidding comes after some critics have pointed to it as a culprit in driving up real estate prices. But Katie Steinfeld, broker of record for real estate agency On The Block, disagrees.

“There are situations where one buyer will significantly overpay versus everybody else, and in those situations, I would say for sure that will not help decrease prices.” But this tends to be an exception, Steinfeld says. On The Block operates its own auction platform, providing similar information to what Openn Offers plans to disclose. When the size of competing bids are disclosed in auctions, Steinfeld says she found that prices jumped higher.

“A lot of buyers, their argument is when they’re in a blind bidding situation, they don’t want to go up any higher because they don’t know what the next highest offer is. They don’t want to overpay,” she says. “But if they know what they need to pay in order to get the home, that can push them up even higher.”

Steinfeld says she doesn’t believe eliminating blind bidding will suddenly tame Ontario’s runaway real estate prices, but she does think that CREA’s attempt to provide buyers with more information is a step in the right direction.

“I don’t think this will have an immediate impact. I think opening things up and making things more transparent is going to be a process. But I think it will start helping [the market] out and bring more opportunities and options to buyers and sellers,” she says. “Having more information at their disposal is always a good thing.”

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Cottage Life

Ontario cottage regions with the biggest and lowest price jumps in 2021

Illustrations by Taylor Kristan

Real estate company Royal LePage has released its 2022 Recreational Property report. The company’s prediction: Cottage prices will continue to increase at a dizzying pace.

According to the report, the average price of a recreational property in Canada, which includes secondary properties, such as cottages, chalets, cabins, and waterfront properties, will increase by 13 per cent in 2022 to $640,710.

“The factors challenging Canada’s residential real estate market—chronic low supply and growing demand—are amplified in the recreational property segment,” said Phil Soper, president and CEO of Royal LePage, in the report. “Demand for recreational properties continues to vastly outstrip inventory in many cottage regions across the country. Waterfront and mountain-top locations near cities are limited by nature, even in a vast land like Canada, forcing buyers into multiple-offer scenarios.”

Ontario led the charge in 2021, recording the country’s highest recreational property price appreciation with a 34.6 per cent increase from 2020. The average price for an Ontario recreational property in 2021 was $653,000. Royal LePage predicts that number will jump to $737,890—a 13 per cent increase—in 2022.

A cottage on the water will cost you even more. In 2021, recreational waterfront properties in Ontario sold for an average of $888,000, second only to British Columbia, which saw prices soar above $2 million.

YOY increase of waterfront property price in Ontario

All of Ontario’s cottage regions saw a price hike in 2021, but some more than others. When it came to waterfront properties, the Land O’ Lakes, an hour north of Kingston, saw the biggest jump with a 60.7 per cent increase, the average price rising from $450,000 in 2020 to $723,000 in 2021. This was followed by Orillia, with a 51 per cent increase from $788,000 in 2020 to $1,190,000 in 2021–making it the most expensive cottage market in Ontario.

Even with international travel expected to pick up this summer, cottage demand continues to be strong as buyers look for a vacation property to escape the city. “It’s early days, but we are seeing absolutely zero impact, given the ability to travel, on the market so far,” says Susan Benson, a real estate broker in Muskoka.

Who are the buyers?

Millennials are out in full force, she says, in both the residential and cottage markets. With the ability to work remotely, many are looking for options outside of the city. Baby boomers are also having a significant impact on cottage real estate.

“The thought people had was that baby boomers were going to quietly downsize and head off into the sunset. Well, that’s not happening,” Benson says. “They are typically approaching, or into retirement and…they are cashing out of wherever they are, coming to this market, and buying their dream home, which may very well be on the water.”

According to the Royal LePage report, 36 per cent of Ontario’s boomers are considering purchasing a new residence within the next five years. Fifty-six per cent of that group is considering buying in a cottage region. That means that over the next five years, Ontario could see an additional 729,000 people enter the cottage real estate market.

Low inventory continues to drive up prices

A second factor driving up cottage prices is the low inventory rates. Out of the 151 real estate professionals surveyed in the Royal LePage report, 84 per cent said that their region has fewer recreational properties for sale this year than last year.

According to Benson, as of the end of March, there were 95 waterfront properties available in the Lakelands Real Estate Board North area, which includes Algonquin Highlands, Bracebridge, Dysart et al, Georgian Bay Township, Gravenhurst, Highlands East, Huntsville, Lake of Bays, Minden Hills, Muskoka Lakes, Parry Sound, Severn, and The Archipelago. That inventory is down 39.9 per cent compared to the same time last year, and down 73.9 per cent compared to March 2020.

Cottage owners have held onto their properties during the pandemic rather than selling. This has caused multi-offer scenarios, with the selling price often eclipsing the asking price. According to the majority of real estate agents surveyed in the Royal LePage report, 75 per cent of recreational properties in Ontario are selling above asking price.

What isn’t selling and why

As long as you implement the right strategy, there are few cottages that won’t sell right now, Benson says. “We are seeing some properties not sell, but it’s where the price they’ve selected is misaligned with what they’re offering.”

Not all Ontario cottage regions saw major price jumps in 2021. Haliburton County recorded the smallest change with the average waterfront price rising 14 per cent from $700,000 in 2020 to $801,000 in 2021. Anthony vanLieshout, the broker of record for Royal LePage Lakes of Haliburton, says you should take this number with a grain of salt.

“If you have one or two high-end, big sales, all of a sudden those numbers become a portion,” he says. “I’m not of the mindset that Haliburton wouldn’t have seen similar appreciation to any other cottage area. It’s exceedingly robust.”

vanLieshout has, however, started to notice some hesitation on high-end properties, particularly the ones listed for over $1.5 million.

“Low inventory, that’ll probably keep the prices where they are, but interest rates may be going up and gas prices…Now it’s $100 to go to the cottage back and forth,” he says. “I think we’re going to see a stabilization. It’s maybe already started.”

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Cottage Life

How to avoid falling victim to a bad cottage real estate deal in a hot market

Photo by fizkes/Shutterstock

Low inventory of recreational property is forcing buyers to compete against multiple-interested parties, often driving the cottage’s price well above asking.

With cottages forecasted to remain a hot commodity this year, according to Royal LePage’s 2022 Recreational Property Report, inventory across the country is expected to remain low, driving up the average price of a Canadian cottage by 13 per cent to $640,710.

“What we are seeing in this market is, generally speaking, fewer buyers are competing for the same property, but those buyers are highly qualified, very serious, and highly motivated,” explained Susan Benson, a real estate broker in Muskoka. “In almost all cases, they have lost out in a previous competing situation. So, by the time they get to one that they really want, they’re invested.”

To make themselves more appealing to sellers, many buyers are presenting firm offers, forgoing property research to close the deal fast and eschewing conditions, such as a home inspection. The issue with skipping these steps is that you could end up paying over asking price only to discover major problems with the property that will cost you extra.

No matter how badly you want a cottage, there are certain steps you shouldn’t compromise on. Here’s everything you need to do, to avoid falling victim to a bad real estate deal in a hot market.

Work with a local realtor

It may seem wise to save some cash by handling real estate negotiations yourself, but without a realtor there is a lot you can miss. “They will surround you with a team of experts and resources that can help guide you through what is a really challenging time [in the cottage market],” Benson says.

In particular, you want to partner with a local realtor, someone who knows what’s available in the area and can help you find the type of cottage you want. Knowledge of the area’s geography and nearby services makes a local realtor better equipped to brief you on any foreseeable issues with the property, whether the property’s overpriced, and whether it’s worth engaging in a bidding war.

Use a home inspector

The last thing you want is to purchase a cottage only to find out it has a cracked foundation, a rotting boathouse, or a long list of other problems that could require further investment. The best way to avoid any surprise renovations, Benson says, is to hire a home inspector.

“We’ll have a home inspector look online at the listing pictures just to see if there are any obvious red flags,” Benson says. “If our buyers really like the place, and we’ve gone to see it, we will try to arrange a second showing for the home inspector.”

The issue with this is that COVID has affected showing times. Previously, potential buyers routinely had an hour to look over the property, but in many cases, this viewing window has been shortened to 30 minutes.

“That’s a real challenge,” Benson says. “But [a home inspector] has a critical eye that can pick up on unanticipated maintenance costs, such as a boathouse and docks, to get a sense of the condition they’re in, and the condition of the crib or structural supports. If something’s wrong, that can be a really expensive unanticipated cost.”

Speak to neighbours

As a realtor, Benson says she often speaks with cottage neighbours on behalf of the buyer. “Now that we’re two years into COVID, there are many, many more people actually living full time in cottage country. So, it’s usually very easy to find a neighbour, and they’ll give you all kinds of insights.”

By speaking with neighbours, not only will you get a sense of what the area has to offer, but you’ll also get a better idea of who you’ll be residing next to. There’s always a chance that the neighbouring property could be a cottage rental known for hosting large, rowdy groups.

Research the property

Your prospective cottage may look great during the summer, but without proper research you could have no idea that it sits in a floodplain. Or, if buying during the winter, you may be won over by the four-season access, but what happens when the ice melts and you’re left with a weedy shoreline.

Neighbours can help provide this information, but Benson also suggests looking at a topographical map of the area to see if flooding could be an issue. While you’re at it, you should also research the property’s zoning information.

“You might think your cottage is in the middle of nowhere, but in fact, you’re near a proposed or approved development, particularly in proximity to places that are zoned under a resort zoning, or in proximity to a marina,” Benson says. “You want to make sure it’s the right location.”

Having a solid grasp of the property’s zoning will let you know whether you’re allowed to rebuild, renovate, or add any new structures. It’ll also avoid any nasty surprises, such as having to purchase the cottage’s shoreline or road access from the municipality.

Should you purchase the shoreline road allowance when you buy a waterfront property?

Choose a reliable mortgage broker

Similar to your realtor, a good mortgage broker should know the cottage market. That way, they can help you pick a financing plan that fits both you and your property’s needs.

“What you don’t want is to pay a premium price for a property and then have after-the-fact money problems that turn what was supposed to be a dream into an absolute nightmare,” Benson says.

This is particularly true for foreign buyers or anyone looking to use the cottage as a rental, she adds. “You really have to understand the tax implications of that.”

When choosing a mortgage broker, Benson says you need to make sure their focus is on you as a client. “What I would say about a really good broker is that they’re very responsive to questions and are willing to take the time to educate a buyer about the implications of what they may be borrowing…and are willing to look at options beyond a very specific portfolio of lending options. The broader the better.”