Brokers aren’t the only ones frustrated by tougher lending rules, as real estate agents selling large-acreage properties may increasingly need to adjust their listing price, as buyers are hamstrung by more stringently applied financing rules.
“I have that discussion with my sellers,” Ron Pollock, a real estate agent who specializes in rural Edmonton, tells MortgageBrokerNews.ca’s sister publication, REP. “One of the difficulties in selling this [type of] property is getting a buyer who is financed. The reality is that a buyer doesn’t always have an extra $100,000 in their pocket to satisfy the banks’ rules.”
Pollock says these rules – which consider any land parcel over five acres to be a commercial property – have always been in place, but banks and other lenders are now more strictly applying them. Still, he says the issue is two-fold.
“Many people don’t take the time to check on things, and assume [the lending environment] is how it was when they bought their last property five or 10 years ago,” he says.
On the other hand, Pollock says the banks don’t recognize the value that these large properties offer. For example, a 40-acre property with a house, a barn, a stable and a workshop would be very appealing for buyers, especially those looking for large luxury homes near Edmonton, but banks categorize these properties either as commercial ventures or cap the property at five acres if it’s to be used for residential purposes.
“Some [buyers use alternative lending sources], but they usually get a certain element of disappointment that things aren’t as easy as they thought,” Pollock says. “They don’t think they should have to put themselves into that position to go to the backyard lender, so to speak.”
As a result, Pollock says individuals who were once able to easily secure financing are now walking away from large-acre properties because lenders refuse to lend to them.
“We all work pretty hard to find customers and find a property they’re comfortable with, lots of time and effort to write an offer,” he says. “Then to find at the end of the day that the deal goes sideways and more often than not it’s for financing... That’s one of the real challenges these days.”