Buyer Costs | Foreign Ownership | The Market | How to Sell Your Big White Property

Financing your Big White Investment

Big White is a great place to investment in real estate. Why? It’s because:

• Real estate values continue to increase year over year and have done so for the past 5 years.
• The low Canadian dollar.
• The fact that Big White is being recognized in the international community as a world-class ski in / ski out resort destination.
• Real estate values are still very reasonable.

Many visitors to Big White come to the resort to enjoy a great ski vacation. They have no intention of buying real estate when they arrive here but that often changes once they’ve experienced Big White’s signature “champagne” powder and tremendous variety of terrain. Few are able to resist the lure of this coveted resort. Many visitors that have skied all over the world come back annually to Big White. They say there is no better skiing anywhere in the world and the value at Big White is exceptional. So, if the lure of the resort has captivated you and you decide to join the family of owners and investors at Big White, here are some things to consider about financing your Big White investment:

Financing Criteria - The Basics

Basically, there are two things to consider when financing a property at Big White, or anywhere in Canada, for that matter.

• First, the value of the financing, including the mortgage payment, taxes, utilities and strata fees cannot exceed 32% of your gross income. If you have no other debt, an exception may be made up to 35%. Total debt servicing, including all other loans and credit payments cannot exceed 40% of your gross income.
• Secondly, in a conventional mortgage, a down payment of 25% is required. Exceptions to this include high ratio, insured mortgages that are available for your primary residence with a minimum of a 10% down payment. The insurance cost increases as the percentage of financing required increases

Financing Criteria - Higher Valued Properties

With higher valued properties, lending values decrease as the value of the property increases.

• In other words, for a property valued at or below $500,000, a conventional down payment of 25% is required.
• For the next $250,000, the down payment required increases to 40%.
• For the next $250,000, the down payment required is 45%, and increases to 50% above that.

For example, with a purchase price of $600,000, the maximum mortgage allowed is $435,000. This applies to Canadian residents only for either owner occupied or investment properties.

Non-residents:

• For the first $400,000, a down payment of 35% is required.
• For the next 300,000, a down payment of 45% is required.
• Then 50% is required for the remainder.

For example, if the purchase price is $600,000 the maximum mortgage allowed is $357,750.

Buyer Costs

When purchasing property at Big White, there are certain costs that the buyer is responsible for. They include:

Lawyer or Notary Fees & Expenses

• Searching title
• Investigating title
• Drafting documents
• Land Title registration fees

Taxes

• Goods & Services Tax (7% on new construction and short term or nightly rental)
• Property Tax Adjustment
• Property Transfer Tax (1% on the 1st $200,000 & 2% on the remainder)
• Sales Tax (if applicable)

Fire Insurance Premium

Strata maintenance fees (if property is part of a strata corporation)

Survey Certificate (if required)

Foreign Ownership

Buying a home at Big White is a simple and hassle-free process when you choose Re/max. We work with a number of lawyers and mortgage lenders to ensure that out-of- country real estate transactions are simple and hassle-free.

Here is a brief summary of the fees associated with buying a home at Big White. This applies to both residents and non-residents alike:

Resident & Non-resident fees:

• Property Transfer Tax: This is a Provincial Government tax that applies to all transfers of real estate and is payable on the completion date of the transaction. The rate of tax is 1% on the first $200,000 of the purchase price and 2% on the balance.
• Goods and Services Tax: The GST is a 7 % tax that applies to the purchase of new construction properties and on the resale of accommodations that have been rented out for short term or nightly rental. The payment of the GST can be deferred if the new purchaser intends to use the accommodation for short term or nightly rental at least 90% of the time and he or she becomes a GST registrant.
• Insurance: Buyers are required to arrange insurance on single family residential accommodations as well as liability and content insurance on strata-titled properties.
• Condominiums: Of special concern to condominium purchasers will be the monthly maintenance charges or strata fees that apply. The Strata Corporation is also entitled to levy special assessments for extraordinary expenses, if necessary.

Non-resident fees

The above fees apply to both residents and non-residents of Canada. However, for non- residents, here are a few things you should be aware of:

• Withholding Tax on Rental Income: You may obtain an exemption for the 25% that non-residents are required to pay to Revenue Canada by simply filling out a form called an NR6 explaining that the projected rental income is less than the anticipated expenses associated with the property. You must, therefore, file a tax return with Revenue Canada.
• Execution of Mortgage Documents: Once the borrower has signed a commitment letter with the lender, the lender will instruct a lawyer or notary to draw the mortgage security. These documents must be couriered to the borrower for their execution in the presence of a notary public. What this means to the buyer is simply that sufficient time must be allocated to courier the documents because faxes or other methods of transmission are not acceptable in this case.
• Methods of Payment: It is recommended that the purchaser open a bank account in Kelowna for the transfer of funds. The balance of the purchase price must be paid by certified cheque or bank draft in Canadian funds. Since exchange rates fluctuate from institution to institution, from day to day and are dependent on the amount to be exchanged, it is important to research this before the completion date.
• Completing the Transaction: It is critical to complete transactions on the designated completion date in British Columbia. The vendor has the option of canceling the contract of Purchase and Sale should the funds not be paid on the stipulated completion date, and is entitled to retain the deposit. It is not uncommon for vendors who wish to complete the transaction to demand interest or additional charges for the extension(s) required for late completion.

Essentially, some rules are different in Canada and may require additional time. Being aware of them and planning for them ensures that your transaction is straight forward and hassle-free. For further information or if you have specific questions about foreign ownership, we will be happy to discuss them with you.

Selling a Home for Non-Residents

Selling a home at Big White is not a complicated process. For non-residents, there are a few points you should be aware of when considering the sale of your Big White property.

Obtain a Clearance Certificate: You will need a Clearance Certificate from Revenue Canada prior to the completion date of your transaction. The current wait for a Clearance Certificate is approximately 10 to 12 weeks, so it is important to contact your lawyer or accountant as soon as an accepted offer has been received. Before issuing the Clearance Certificate, Revenue Canada will need to collect any tax payable on the property to be sold.

Calculating Capital Gains: To determine the adjusted cost base in order to calculate capital gains, Revenue Canada allows the inclusion of the following:

• Property Transfer Tax
• Legal fees and disbursements associated with the purchase
• Furnishings and renovations included in the selling price
• GST
• A portion of the interest on mortgage payments

Revenue Canada does not allow any deductions from the selling price in determining the gain. The rate of the Capital Gains Tax is 33.33% of the gain. However, by filing a Canadian tax return with Revenue Canada after the sale, some of the tax paid may be recoverable.

We deal frequently with non-resident sellers and have access to a number of professional resources to assist you with this process. If you need us to facilitate this for you, give us a call or drop us a quick email.

Please also feel free to contact the Government Tax office at 1-800-959-5525 or visit their website at www.ccra-adrc.gc.ca.

The Market

Although Big White is famous for it’s exceptional snow quality and varied terrain, it’s also much more than a great ski hill. Real estate development at the resort has experienced tremendous growth over the years and prices continue their upward trend.

What’s driving the activity? Big White has traditionally been recognized as a great place to ski and snowboard. Real estate development was not the primary focus. However, with the expansion of ski terrain, the availability of more land for development and a more aggressive development plan, construction on the mountain has accelerated. Real estate activity at the resort is keeping pace with that of much larger resorts. And new development on the mountain is as upscale and luxurious as any other high end resort with post and beam construction, stone fireplaces, soaker Jacuzzis and amenities like heated tile and DVD players in the units. The new Sundance Lodge that will begin construction in the spring of 2003 sold out in less than an hour when it was made available for sale on March 15. That’s more than $10.8 million in real estate that sold in one day!!

Current statistics show that over 80% of the real estate transactions at the resort involve foreign investors, of which 50% are from the United States. Given the exceptional quality of product being developed, the low Canadian dollar and the fact that the Big White real estate boom is still in its early stages, Big White real estate is still a bargain.

We expect to see continued strong growth and development through the coming years at Big White Ski Resort.

How to Sell your Big White property for the Highest Price Possible

The potential buyer of your resort home is arguably the most important guest you will ever have. If you’ve given any thought to improving the look of your property before you sell, every detail counts. The following are tips on what buyers specifically notice.

The Exterior:

• Ensure your entry way is unobstructed. If there are stairs into your unit, ensure they are in good repair.
• If there is a garage in your unit, ensure the space is clutter free and the garage door opener is working.
• Repair or paint anything that’s not in “like new” condition.
• Make any necessary repairs to worn shingles or cracked surfaces.
• If you need a new roof, now’s the time to do it.
• Ensure your deck is in good condition.
• Replace burned out light bulbs.
• A welcome mat or wreath in your entry way is a nice welcoming touch.

The Interior:

• Ensure your windows are clean and the view is unobstructed.
• Repaint anything that is showing signs of wear and tear.
• Repair or replace missing or damaged tile, hardwood, vinyl and baseboards.
• Shampoo carpets.
• Ensure your entire place is sparkling clean.
• Keep drawers and cabinets tidy and organized.
• Display candles or other items that make your home feel “comfortable”.

We are experts in our field. If you need advice or want to talk to us about preparing your home for sale, please don’t hesitate to contact us.