My Assessed Value has been too high since roughly 2018. This year I decided to appeal because we reached a point that it was 15% higher than it should be. I had my hearing with the Property Assessment Review Panel in February and the BC Assessment recommendation was upheld. I was shocked.
I provided a depth of evidence that should be irrefutable. The explanation given?
The Assessor provided a range of value that spanned $307,000. My Assessed Value (although near the high end of the range) was within this massive range so it was deemed acceptable.
I’m upset by many things. The Assessor provided little evidence, but made a statement that she wanted to lean heavily on one high-valued sale near me. I thought I had demonstrated how and why that home was superior to mine in all categories, however they used that as the foundation for the high end of their scale. It’s better than my home in every single way, but one. The one: My home is 200 square feet bigger (1,800 vs 2,000). That 200 square feet is apparently worth a whole lot of money in their eyes.
The path I chose to prove my point seems to have been the wrong one. I have learned that my process is so different from theirs. They would have been quite happy to do a deep dive on just one or two properties and consider the job done. I looked much broader to prove my point across the marketplace.
I will be appealing, which takes it to the Property Assessment Appeal Board (some time in April).
There are a lot of different headlines right now with predictions on interest rate trajectory, bubbles or market collapses. The stories often speak to different jurisdictions, from Canada as a whole, to large cities vs small, and then the US. We saw in 2008 that our banking systems are quite different. I mention that as a warning because there are some scary opinions right now of the American real estate market.
I want to remind you of the “Stress Test” for Canadian mortgages. It’s a requirement that was implemented in 2016 and it’s been tweaked since then. The spirit of the rule was to ensure that a borrower getting a very low interest rate could qualify for a higher rate…It was inevitable that rates would go up and it was a method to protect borrowers from default.
I’ll use some rough figures. Let’s go back a few years and imagine a buyer is qualifying for a mortgage with an interest rate of 1.90%. The stress test requires a borrower to qualify for the higher of 5.25% or their rate plus 2% (3.9% vs 5.25%). Interest rates are in fact higher than 5.25% today, but close enough that borrowers should (in theory) be able to find a way to manage their new payment. I’ve heard many mortgage brokers are extending the amortization period to help make the payments more manageable until rates go down.
We also need to keep in mind that although we don’t want to see anyone go into default, only a portion of owners are likely to be at risk. I went looking for real numbers. 2021 census data for the Lower Mainland indicates there are 1,179,020 owner and tenant households with income greater than zero (total households was 1,196,480). 71% of those households spent less than 30% of income on shelter costs. They (owner-occupant or landlord) will still feel pain at mortgage renewal time but a few lifestyle tweaks will keep their payments manageable. The remaining 29% will obviously experience it differently. We hope they find solutions that keep them in their homes.
This doesn’t necessarily mean the overall economy is well-protected. Canadians historically prioritize mortgage payments and will continue to do so. All other household spending is going to get reduced or cut until interest rates go down. Overall economic activity is likely to decline while homeowners focus on their mortgage payments.
What do you want? Absolute privacy? A general store nearby? Somewhere for the kids to play? Swimming? Skiing? Biking? Skating? Off-roading?
I’ll step in front here and give some advice. Everything gets a little old after a while. A secluded property that’s your land, but just that – land, can get boring. You’re going to want something for you and your guests to do.
Recreation at Your Vacation Property
I’m pointing out the obvious. You want to know what the area has to offer. You’ll know if it’s your priority to choose a location that offers a specific activity (skiing, boating, etc.). It’s the smaller, maybe less-obvious recreation options that can add a lot of life to an area. It adds variety and possibly entertains people with varying interests.
The first thing that comes to mind for me is the local playground. It’s fantastic to have a place to tire out the kids. It’s not just that there is a playground, but the act of strolling over to it adds that little extra variety the kids need to keep them stimulated. Many vacation property areas can’t offer this and I’ve noticed it’s a heavily used amenity in my area. It’s also a great spot to help the kids make new vacation-friends.
You could look at 4 or 5 different lakes or rivers as an option. You might not be an avid boater or fisher, but maybe it’s something you’ll do sparingly or it’s something your guests will love, which will add a really fun treat when they visit. It might not be a priority for you, but access to these activities could be the tie-breaker or help justify one location over another.
Swimming in that body of water could be a big deal to you. Is it warm? Accessible? Safe? I’ve noticed that buyers will pay extra for communities that offer a swimmable beach area.
What about the winter time? Maybe the lake will freeze and you can skate or fish. That’s one more memory-making activity to add to the list. Of course, add all the other activities that go with a snowy climate. It can be really fun to leave behind the rain of the coast in exchange for snowy adventures, sunny skies and crisp, cold air.
The community I’m in has a full roof covering an open-air ice rink. It has boards, players’ benches, bleachers and lighting. Anyone can arrive, push a button and the lights turn on for 40 minutes. It’s an amazing community amenity. It’s also highly used in the summer. It provides shade and sport courts with ball hockey, basketball and pickleball. It wasn’t high on my list of things to get excited about when we bought our property, but we have so many memories at that rink. I wouldn’t want to trade my location for one that couldn’t offer something similar.
Any other community buildings? You could find a property with a short drive to a community centre, ice rink, pool, bowling alley, zip line, ropes course, water park. These are all great gathering places for a day out.
We want to enjoy the quiet and slow pace of a vacation property and sometimes we need to make sure we get out and take on some activities. You’ll find yourself exploring more and more as the years go by and I’m sure you will appreciate the variety.
Resources You’ll Want Close to Your Vacation Property
The farther you get from resources, the less expensive a property will be. You probably want some solitude, which I fully understand. There are also times where it’s very helpful to have some resources nearby. I’m thinking of groceries, coffee shops, retail shops, restaurants, hospitals, veterinarians, etc..
The option to quickly get a few things (or many things) can make pre-trip planning much easier. Remote properties with a long drive to a store means that you’re packing everything in and planning all of that in advance. Seclusion is absolutely wonderful, but it’s also convenient to scoot down to the store for a bottle of wine and that sauce you forgot.
Wine tours, shopping and dining out may play a big part in your plans for a vacation property. That’s fantastic. Put it near the top of your list of priorities and make it part of your search. You’ll definitely be paying more to be near those resources. However, resources usually means a larger population which means you’ll see a variety of housing options. An acreage might not fit the budget in those areas, but maybe a townhouse near the lake does.
Environmental Threats to Your Vacation Property
This is a grim topic that I’ll pass by quickly. It’s not something we want to consider and often think our chosen area won’t be the one to get hit. Be really honest in your assessment of the risk level of certain areas. I don’t just mean forest fires. Nearly every area is at risk of fires. You can consider specific properties, proximity to large forests, clearings that could protect you from expanding fires or water sources nearby to help douse a fire quickly. Some properties could be considered more risky than others, but fires can also be very unpredictable.
Floods can be a serious risk depending on how lakes and rivers interact with low-lying residential areas. Most developed areas of the interior are in some sort of valley. There will be moments when lakes or rivers risk exceeding their capacity and you should know if the property you’re considering would be one of the few impacted if that were to happen. My community floods every year in the Spring. I’m outside of the 200 year flood plain. A buyer wouldn’t know this if they only ever visited in the summer and didn’t have an agent who knew the environmental history of the area.
Let’s leave it at that. Make sure you have a local expert advising you. Small differences in the area you choose can make a big impact. Be careful not to let a beautiful view or stunning cabin cloud your judgment. Step back and make sure you’ve asked the critical questions. You’ll get to spend many more of your hours at your vacation property, being on vacation.
Location, Access, Structures, Utilities and Services
We have a lot of choices for vacation properties in British Columbia and each of us has different priorities: proximity to water, acreage (gardening?), shopping, services and recreation.
One priority that is extremely common is a reasonable travel time from the Lower Mainland. Go West and you’re taking a ferry. North means you have one option: the Sea to Sky highway, which really throws a wrench in your plans when it’s closed. Head East and you’ll find more options, and more winter-like conditions for part of the year. Going South means you’re taking on the border and added tax complications.
I’ll let you choose which direction makes the most sense for you. No matter which way you go, there are a few things I want to put on your radar if you’re looking at property outside of a fully serviced city grid. You’re going to want to wait for Part 2B if you plan to buy within a developed city with water and sewer at the property line. This post (Part 2A) touches on some of the unexpected quirks of rural property.
Accessing Vacation Property
This isn’t about paved roads, road closures, landslides or snow storms. This is about what happens when you get within a few kilometers of the property. Boat access only? Private road? Gravel road? Plowed, maintained, or not?
We take for granted the simplicity of accessing our homes on a small parcel of land. Buy an acre with the house 200m from the road and you’re 100% responsible for maintaining that 200m. It could wash out in heavy rain. You might need to clear snow in winter.
The longer that stretch of road gets, the more complicated it gets. Many acreages are accessed by public roads that are outside the boundary of regular maintenance, which includes snow removal. Residents on those stretches have to sort it out on their own. It’s even more complicated and costly if there is an elevation change. It gets slippery, muddy, icy, washed away! It’s not a reason to avoid these properties. It’s my warning to you that the more remote you get the more work it is just to roll into your driveway.
It’s pretty amazing when you’re there. An abundance of land and privacy. Opportunity to make use of the land in the best way that suits your family. You just have to get there.
Structures (Residences and Out Buildings)
A stunning log cabin isn’t in the cards for all of us. You’re going to encounter a wide variety of structures from practical modular homes, old cottages, and custom homes. Standard residences are straightforward, but far less common in rural areas. You’ll see a lot of interesting custom homes and even more modular homes. Modular homes (can be referred to as park-model homes, commonly encountered as single wide or double wide trailers) can be considered by a lender as a non-permanent structure. The trouble with that is it changes the category of the property and how a mortgage can be structured. Bare land mortgages are more complicated and more costly than a typical mortgage secured by a permanent residence.
The lender wants to see a permanent, habitable structure in order to offer a conventional mortgage. That means it needs a permanent foundation, heat, water and sewer (septic, or otherwise). My vacation property includes an old park-model home (single-wide). It’s permanently fixed in place, connected to the well water supply and a septic system. It operates as a permanent structure, but it was flagged as not meeting their standard and my minimum down payment requirement was bumped up to something higher than the norm. I think they asked for a 30% down payment. Every situation will be different.
All the other structures on the property (barns, sheds, decks, docks, etc.) are often built and maintained without permits. Rural property owners make-do with what they have and it means you can see some quirky structures. Do not trust any structure based on what you see in photos. That’s a good starting point but you need to see it in person if you intend on keeping and making use of any structure on the property.
Utilities and Services
You want heat, water in and a way to flush it out. Properties within a city will have electricity, gas, water and sewer connections at the lot line (if not already a developed lot). Many rural properties often have electricity, but some could be very far from the nearest connection. Far enough that it’s more economical to go with solar and gas generators.
Large parcels of land will likely have you looking at water from a well, river, or lake. It could be sourced from your property or not. Sometimes it’s from a community water source, for which you pay an annual fee for use and maintenance (including mechanical and testing). It’s certainly beneficial to see recent results of water tests, but testing isn’t that common with individual property owners so don’t expect it (community water sources have regular testing schedules). You wouldn’t be out of line to request the opportunity to get a water sample tested as a condition of your offer.
It’s very common for rural properties to use a septic system. Septic systems are simple, but can be costly if something goes wrong. It’s too much to speak about in detail. Septic systems are common. Learn about them. Ask your agent. Do your research on the system type, age and maintenance when you find the right property. My property is within a community grid of lots roughly 50’x120’. Every lot has a well at the front and septic field in the back. Standard septic systems require a minimum clearance of 100’ from the well.
A septic system can run quite smoothly if treated right, but they have capacity limitations and that can be really meaningful if you have plans to gather multiple families at your property. Make sure to chat with your agent to learn move about septic capacity and how to work with it.
Gas is not usually piped into rural communities. You would keep a large propane tank on your lot that would be refilled periodically. A property might use gas for the heat source. It can also used for the fridge, stove, dryer and more if electricity is scarce.
Summary
It’s really fun to browse listings of vacation properties. They can look beautiful and very appealing in photos. Keep in mind what it takes to arrive at your door and what systems are in place to allow you to easily and quickly get everything running on arrival so you can enjoy your time. Know what you’re buying and know that even though it looks like a house it might not operate anything like what you’re accustomed to in the city. Oh, the bonus of that is that property taxes are very low…because most of the cost and responsibility falls to you.
These are my observations as an owner of a vacation property. This is a series of posts speaking to fluctuations in property value, how to buy vacation property, when to buy, managing property maintenance and the option/decision to rent your vacation property.
Immigration is an undeniable contributor to our challenges with housing affordability. All levels of government campaign on plans to improve housing affordability while the Federal Government simultaneously pursues aggressive immigration numbers. Why don’t the Feds dial back their immigration targets?
I’ve been learning what I can from a variety of economists and they all refer to the demographic balance required to sustain a national economy. Many Western countries are facing an unprecedented cycle where the older generation (50+) will outnumber those in the workforce. Canada’s birth rate hasn’t come anywhere close to the replacement rate (essentially every individual replacing themselves) since the baby boom. Simply put, we don’t have enough people in the workforce today to pay for retirees and there are even fewer people in the queue for the next 10-15 years. The good news is that population projections look pretty good after that (the end of the baby boom population-dominance). We need to weather the storm.
Canada’s solution is to attract immigrants who are young professionals. These are educated people who go directly into the workforce and contribute to the tax base long enough to make their contributions a net gain to the Federal Government. It doesn’t matter how much harm it does to the housing market. Canada needs the tax revenue. We need employable immigrants. They need to live where the jobs are. Housing competition will persist in Canada’s major cities.
I wish the government would just come out and say this, but that’s not how politics works. They pursue headlines that speak to your needs. They roll out a ‘foreign buyer ban’ to get the headline and then they add endless exceptions so the economy persists. They add first time buyer incentives that are seldom used and not terribly helpful. Quietly, the government (regardless of the party in power) is pursuing long term economic viability while shouting loudly about what they’ve done to help your short term goals.
I might be wrong. Tell me if you see flaws in this line of thinking. It feels to me that we need immigration, despite the added pressure it puts on housing.
High or low. Right or wrong. The first thing you want to remember is that if your assessment is genuinely off by $50k you’re not out of pocket a ton of money. Property tax rates in New West are roughly 0.4% so a $50k difference equates to $200 in taxes. We all like saving $200, so what are we looking for?
When and why does it make sense to appeal the assessment? You definitely want to take a close look if you’re increase is higher than the average. Unfortunately my home was in a huge growth sector in 2020 so my 2021 assessment was way above the average. The assessed value was accurate and sadly, that meant my taxes went up. This year, my increase was below average and that kept me away from thoughts of appealing my assessment.
Regardless of your increase, you might feel that your assessment missed the mark. The first thing I do is check on my neighbour’s assessments. I search up addresses that look like my home. I’m looking for big variations, and especially if it seems that the assessment hasn’t properly accounted for updates. This is where BC Assessment gets it wrong. They pull data from municipalities. The formula accounts for (and depreciates) the value of building permits associated with the address. No permits, means no data to increase their value for improvements. However, appraisers do look at MLS photos. They also call me at least once per year to verify property information when using one of my sales as part an appeal.
Some of you have already reached out regarding your assessment and those that I’ve found to be inaccurate looked to be using a small sample-size (usually from within a condo building) to justify their price per square foot. Those sales were outliers in the overall market and inflated the assessment. These were situations where an appeal was probably worth pursuing. They were off by about $40k, or about $160 per year.
It’s normal to enter the process of buying a home with visions of choosing your perfect home – a process of selection. It’s an opportunity to take control of your housing choices and you want to make the most of it. You want to choose ‘the one’ but in reality, buying is a process of elimination.
You set a list of criteria. You think of your favourite design styles and hope that you find a home that really speaks to you. This is going to be YOUR home. It’s a reflection of how you choose to live day-to-day and the persona you want to exhibit to yourself and your guests.
There’s a problem. I could show you exactly the home that checks all of your boxes and you probably wouldn’t buy it – at least not right away. You need to have seen something else, just to prove that this really is the one. Even in the best-case scenario where a home you love is waiting for you on the market, within your budget…You won’t know it’s the one unless you’ve eliminated other homes.
Hey, just for context…Depending on how you discovered this article you may be in a region with different regulations than those listed below. My office is in New Westminster, BC Canada and I operate under rules that apply across the country, the province, and my region (the Lower Mainland of BC). Regardless of rules, the net result of my information below is that at some point you want to build a relationship with a local professional…preferably someone ethical who adheres to their region’s rules. Let’s get into how to get serious about buying a home.
You’re ready to get serious about buying a home…How should you start your real estate search?
You’ve been browsing listings, considering your budget and mortgage eligibility. You’ve probably looked at a lot of properties online. You knew it wasn’t your time to dive in and get serious…until now. You have choices on how to take that first step. Different steps will feel more comfortable to each individual. Rule Number One: you can choose your path. The beginning of the process can be flexible, but keep in mind that the process gets more rigid once you’re ready to make an offer.
First steps to choose from when it’s time to get serious about your real estate search in New West, Burnaby or the Tri-Cities:
Go to open houses
Contact an agent to have a “Buyer’s Meeting”
Make an appointment to see your favourite listing you’ve been stalking online
Hey, quick bulletin…You’ll notice a big gap in time with no blog posts. I was working in a partnership with another agent during that time and blogging on a different site. Expect new, ongoing content to be published on mattbrabbins.ca, including blogs and video content.
…Starting first with a long-form exploration on methods to get started when it’s time to start viewing properties.
