You may be very well accustomed to the documents required when transacting on property in town, and of course, as a professional REALTOR®, you seek out all properties that could match your client's needs. Then it happens on some idle Tuesday that a new listing just out-of-town pops on the market, and you know your buyers will love it! Let's talk about some of the things to consider when helping buyers purchase an out-of-town property.
Can you help buyers of all out-of-town properties?This is a great question because, in Alberta, we operate under a designated licensing system. That means if you only have a residential license designation, you may not be legally able to help your buyers on some properties. However, do not despair. In general, if the property is used only for a residential purpose, then a residential designation may be just what the doctor ordered. To be certain you can work on this property for your client, check with your broker. For completeness in this resource, we will assume you have both a residential and rural license designation.
Should you help buyers of out-of-town properties?As a parent or grandparent likely told you at some point, "just because you can, doesn’t mean you should." This age-old sentiment applies well in this context because as I am writing this article, I am thinking about properties within your geographic area of expertise. However, as the MLS® system gets more unified province-wide, you can more easily represent a client in a jurisdiction you are not familiar with. This is a mistake and fraught with all manner of dangers, so refer to an expert REALTOR® in that area and don’t risk your reputation or business, opening yourself up to potentially getting sued for representing a buyer in a location you have no expertise.
Country Residential Purchase ContractAs a rule, if the property currently has a habitable dwelling on the land, regardless of the size of the property or the related zoning, I recommend using this contract. The main reason is that it anticipates that a dwelling is on the property and handles those variables as part of the agreement and related schedule. In addition, schedules have been created to handle additional variables in the use of the land. The reason why this contract says the GST is included in the purchase price is that it most often looks like a small residential-only resale acreage in which the GST is generally not applicable. However, as you know, this is often problematic for the seller of a larger homestead, but it does not limit the parties from making an alternate arrangement in that case while still handling the dwelling pieces well.
Agricultural Purchase ContractThis contract is best used for plots of land (not subdivided lots usually) where no habitable dwelling exists. In general, the purchase and sale of these properties always have some income element (hay lease, cropping, grazing, etc.), resulting in a GST implication, so the contract assumes this by not including GST in the purchase price. Again, however, GST is a separate and negotiable item that needs to be handled between the parties regardless of the contract used, and this contract does not exclude the possibility of the seller including the GST in the purchase price if the parties agree to that. The agricultural contract allows for more specificity regarding the use of the land and its relative benefits to the buyer, such as income and leases etc., providing better context around the fact that this property is not used for a primarily residential purpose.
Municipal Zoning – In general, zoning can help inform the use and restrictions to that use applied to a property, but it does necessarily need to dictate the contracts used to transact on the property. As a rule of thumb, the contract needs to more closely align with the property's use and unique characteristics than the zoning code itself. The zoning should inform the conversation between the representative and the client regarding their specific needs and if those needs are satisfied within the context of the municipal zoning for that property.
GST Note – Most often, GST seems to be the key issue when an associate was deciding on the correct form, specifically they felt they were being clever trying to sneak the GST into the price for their buyer clients, or demanding the AG contract when representing a seller to ‘force’ the buyer to pay GST. In reality, this is dangerous because it focuses on only one aspect of the larger transaction as well as introduces bad blood into the negotiations early on. It is always best to get that discussion right out on the table upfront to effectively 'rip off the bandage' and ensure all parties know their respective obligations concerning the GST, but should not determine the form used. GST has many aspects surrounding its connection to the contract and should be considered as one element of the agreement but only that, one element of many. Where the GST is a concern for your client, ensure you add a condition that the buyer must seek professional advice from a tax lawyer or tax accountant before proceeding. It is so important that you recognize you are not licensed to provide tax advice to clients, so please stay in your lane and have your clients consult a professional regarding GST implications.
Exceptions – This is the frustrating part for your broker, however, some properties have a dwelling but more closely relate to agricultural use. Your broker needs to make that call in discussion with you as the associate. In rural real estate, there are no cookie-cutter properties, but the vast majority should fall into one of the two standard forms with their appropriate schedules, and your broker can provide invaluable help here.
Provincial Practice Advisor
Bryan has many years of experience in the real estate industry including over 10 years as a former broker in the Edmonton Region.
Email: email@example.comPhone: 403-209-3619