More and more people are leaving the urban centres to live in the country. People like to live on acreages to experience rural living and all that it has to offer such as more space for garages, gardens, animals and to get away from the noise and stress of the city. With remote work access or flexible work environments, it is making the move easier than ever before. However, buying an acreage is significantly more complex than buying a house in a town or city. To ensure the acreage you invest in will support the lifestyle that you have envisioned, here are the two most important steps in the process:
- Hire a Rural Realtor® Specialist!
- To maximize your experience, it’s best to engage a buyer’s Realtor® who specializes in rural property real estate. Often rural properties come with special regulations that the listing Realtor® may not go into detail about in their listing, so it helps to have an expert on your side. With our own personal experience living in the country and 25+ years of experience selling rural properties, the Smith & Griffith Real Estate Team with CIR Realty is here to advise you during the transition from urban to rural living.
- Find a Mortgage Broker that specializes in rural property.
- To maximize your overall experience, it is best to engage a Mortgage Broker who specializes in rural property.
Financing For Acreages – This information has been adapted from Patricia McKean from Unbeatable Mortgages who specializes in financing rural property.
Conventional Mortgages from a Mortgage Lender
- Limited number of acres (typically 1-10 acres) with a house and garage
- Number of acres will vary based on area norm.
- Minimum down payment will vary based on size and location.
- Scenario #1 – Property that is close to urban area and less then 10 acres will likely be approved for a 20% down payment.
- Scenario #2 – Property further than an hour and greater then 30 acres will likely be subject to a more substantial down payment.
- Value of outbuildings may be considered if mortgage is considered Agricultural (higher interest rate) instead of Residential.
High Ratio / CMHC Insured Mortgages
- Minimum of 5% down – will approve the value of the house, garage and `residential component` of the land.
- Approved size will vary based on the norm average number of surrounding acreages.
- Ex. If you purchase a 70-acre acreage but the area average is 20 acres, CMHC will likely only approve the value of 20 acres for mortgage and the Buyer will have to pay for the remaining 50 acres out of pocket or another source of funds.
- Typically, it is easier to secure financing on a CMHC insured mortgage.
- High value outbuildings and mobile/modular homes may result in a larger down payment requirement and/or mortgage default insurance.
Bare Land Loans
- Will be required if there is no home on the property.
- Down payment of at least 25% is typical.
- Down payment may be greater based on the location, size, and value of the property.
Additional Financing Considerations:
- Potability reports are needed for all well water and will be requested either upfront with the lender approval or at the lawyers before closing. Lenders may accept title insurance in place of a potability test and septic inspection.
- Country residential is easiest to finance.
- Agricultural and farmland is more difficult to finance as it is difficult for the lender to proceed with foreclosure if required and the down payment will likely increase.
- Residential mortgages are for a house, garage, and the residential component of land – and that’s all. If the property has an outbuilding of value, the effective value of the property will often be reduced by the lender or insurer, and this will affect the down payment requirements.
- Allow extra time for conditions to be removed on acreage purchases as insurers appraise 99% of properties and well water/septic testing can cause delays.
For more information on mortgages for rural properties – click here.
Next step, is to understand all the additional components of acreage living that need to be taken into consideration before you make the investment:
- Consider the services – It is essential to be able to drink the water and flush the toilet. In urban centers, all homes are connected to a municipal water and sewer system. In the country, generally you need to have your own septic system and water source. In addition, there are other services that you will have to set up in advance to taking possession.
- Evaluate the Septic System – Rural homes typically rely on a private septic system for sewage storage and disposal. Discovering the overall condition (lifespan) of this system and its maximum capacity is a major priority for any potential acreage home buyer. It is recommended to have the septic system (tank and disposal field) inspected as a condition of your offer. You also need to make sure the system has enough capacity for your family otherwise you may have to pay to have it cleaned/emptied more than once a year. A listing that has undergone renovations may not have a septic tank large enough to supplement the increased number of bedrooms and bathrooms (i.e., occupants). Double-check the septic tank’s size and make sure that your septic tank and field will be adequate for your lifestyle.
- Evaluate the Water Source – There are usually two types of water sources for rural properties: water co-op or drilled well. The first type is a water co-op. This is where a group of communities have set up a water treatment plant and members own shares. If this is the case, you must ensure that the water shares are transferred to your name on possession day. There is a usually a monthly or yearly charge for water usage. The second type is a drilled well (most common). If the rural home you’re looking at buying has a drilled well, it is recommended to get the water tested for “potability”. Wells can sometimes become contaminated with various bacteria, making the water unsafe to drink. A tainted water supply will not bode well for your family or livestock (if applicable) and causes issues for insurance and financing. Water Testing is an important condition to satisfy prior to finalizing an offer. In addition to testing for “potability” – a water flow test will reveal the gallons per minute (gpm) and the depth of the well. Usually, 5 gpm is sufficient for most families without animals. When the gpm is under 5 gpm, you may wish to install a cistern system which provides a large volume of ready to use water in a holding tank (100-300gal typically) as it is filled on demand by the drilled well.
- Electrical Power – Power should already be installed if an existing home is on the property. Power lines may be above or below ground depending on the age of the property’s buildings and any upgrades that have been done. As power outages can occur more often in rural areas, a back-up power generator is an option to consider running your essentials such as the furnace, water well, deep freeze and refrigerators, and internet.
- Natural Gas or Propane – Most properties have natural gas however, there are properties that still run on propane. This is where a large propane tank (bullet) is located on the property, and it is usually rented and refilled when necessary. It is important to understand if there are any existing contracts in place with a propane company. Natural gas can be installed on most properties and install costs can be quoted by a natural gas provider or cooperative that services the area.
- Garbage and Recycling Collection – Typically you must hire your own private company to come regularly to pick up your garbage. This will include rental of the bins with a bimonthly or monthly pick up. Most rural property owners deliver their recycling to community designated areas, however, check your local area services to see if there is a private company that will pick up recycling as well. Some rural municipalities provide garbage and recycling services for rural residents at landfill sites on specific days of the week (dump fees may apply).
- Internet Connectivity and Cell Coverage– It is the responsibility of each homeowner to connect their property with an internet provider. There are several companies that service different areas but ensuring cellular coverage and internet connectivity (4G/5G, tower wireless, satellite, STARLINK) is a very important factor in today’s world.
- Home Inspection – Just as with urban property, it is recommended that a professional home inspection be completed as a condition to your offer.
- Property Zoning – Before you buy an acreage, find out what you are and aren’t permitted to do with the land, as well as what you may expect to find your neighbors doing with their property. Zoning determines the permitted and discretionary uses applicable to the land parcel. To fully understand the bylaws that rule your property zoning, first contact the county office for a full description of the Land Use Bylaw applicable to the property. Whether it is owning pets, housing horses or livestock, erecting new structures, or operating a business from the property, it’s important to know what the land use bylaw covers.
- Property Lines and Real Property Reports If you have a few acres or more, it’s often tough to tell where your property ends and the neighboring property begins if there is currently no accurate existing fencing. If property lines look to be in doubt, it may be advisable to avoid property line disputes by having a professional survey done. A survey will provide you with documents marking the boundaries of the rural property, allowing you to see exactly what’s included in your purchase. Consider also getting an aerial drone survey done to scope out your property. If you have several acres or hectares under the title for your property, you may want to scan them with video surveillance to check for flooding, instability or other issues that can arise on rural properties. Depending on the size of the rural property, an Alberta Surveyors Real Property Report (RPR) may be provided by the Seller. This is a snapshot survey drawing of the property as it exists at the time of the surveyor’s inspection of the property. RPR’s show all property lines, distances, structures on the property, and distances of those structures from each property line. The RPR is reviewed by the county and either marked with a stamp or letter indicating compliant or non-conforming to the zoning bylaws (generally setbacks). If the property is found to be non-conforming it may or may not mean that the Seller must take steps to remediate the issue prior to a sale completing. For smaller rural properties, a Real Property Report is expected by the lawyers and part of the Country Residential Property Offer to Purchase. For larger agricultural land such as a quarter section (160acres), a Real Property Report is not often required nor is it included as a standard term in the Agricultural Offer to Purchase.
- Covenants – Be aware of the possibility of a restrictive and protective covenants that governs the use of the land. Under these types of agreements, it is decided what types of animals and structures are permissible and where they can be located in order to protect the environment or the integrity of a rural development. If a covenant exists, you will see it on the land title.
- Additional Costs: The costs of an acreage don’t end with the purchase. It is important that a Buyer plan for the following expenses:
- Insurance – Fire protection is an important issue. Insurance rates could be affected depending on the distance your acreage is from the nearest municipal fire station. Be sure to understand what insurers offer for rural property insurance covering the house, outbuildings, shops, livestock barns and pens, feed supplies, and any other features of the property.
- Lawn Care and Snow Removal – Maintenance of a rural property can be a lot of work. It is your responsibility to mow the lawn, clear debris and plowing snow in the winter from your driveway. Consider the need for larger equipment in your budget such as lawn mowers, plow etc.
- Security – It has become increasing popular to install automatic gates at the entrance of the property, motion sensors, yard lighting, and cameras on rural properties to provide security and combat trespassing and theft.
- Home Association Fees – Some acreage communities will have HOA fees to cover maintenance of common areas.
- Dust Suppression – It may be desired to apply dust suppression to the municipal road surface in front of the property to minimize the amount of dust entering your property from the roadway. This is typically arranged annually through the county’s maintenance department (fees may apply).
- Other Things to Consider.
- Access to your property – is your property on a priority serviced road for snowplowing and maintenance? On pavement or gravel? For example, does the road surfacing and maintenance schedule work for your existing vehicle?
- Consider Buying Title Insurance – Title insurance protects you when:
- There are problems with zoning and building permits that causes a significant loss. For example, if the previous owner built without a permit, title insurance will cover the costs of correcting the problem.
- When there’s a lien on the title generated by the previous owner.
- When errors in surveys and public records threaten your free, clear ownership of the property.
- When you discover title defects which make it difficult to sell, lease, or mortgage your property later.
- When you uncover some sort of real estate fraud that impacts your property ownership.
- Your attorney makes some sort of error or omission regarding title risk.
- When missing or undisclosed heirs cause title defects.
- There is a gap period between the closing and the official registration of the title with the government, ensuring that you’re covered should some sort of problem occur during this process.
Call the Smith & Griffith Real Estate Team with CIR Realty to help you find the right acreage for you and your family!