Posted by Hermann Thoene | Posted in Building A Log Home | Posted on 12-12-2009
Tags: building lot, financing, mortgage, realtor, saanich, victoria, west coast
When I decided to build up an EcoLog business on the West Coast, it was clear that I had to have a “show home”. Ideally this home would be at a location not too far away from where I live now, and easy to reach by interested customers.
I started my lot search around Feb. 2009 in the Greater Victoria area. My realtor setup an automatic MLS search using my search criteria, and I got listings offered every week. I looked at some lots, but mainly to get an idea what I really wanted. And thankfully I didn’t come across my “dream property” at this time: I didn’t have financing approved yet, and wouldn’t have been able to buy at that time.
Getting Financing in 2009
I thought it couldn’t be too difficult to get financing for an interesting building project, with quite a bit of equity available for security. But I guess I was wrong with that. It turned out that no bank wanted to take any risk – no matter how small it was. I went from one institution to another and told my story: I’m starting a new business, have some good equity in my nearly mortgage free home, and want to build another home. Equite sounded good for the banks – but as soon as they heard that I had no regular income, but was building a new business, they shut their doors. I couldn’t even get 50% of the building lot as a mortgage. So much for the effect of the US housing crisis in Canada !
I finally found a very engaged lady at Bank of Montreal, who listened to my plans and believed that my ideas could work. She put a lot of effort into preparing my case, and presenting it to the bank’s risk managers. After several weeks she succeeded not only in getting a stepped mortgage plan approved, but even offering some really good rates. As part of the deal I moved all my financial business (daily banking, financing, mortgage for existing house) to BMO.
On June 15th my financing was approved, and that’s when I started to look more seriously for building lots. I looked at many lots, from Sooke over Metchosin to Saanich, even around the Malahat and Shawnigan area. On July 2nd I found a “good fit” at a reasonable price through the http://propertyguys.com website. The lot was a subdivision of a bigger property, and was located in a good location in Central Saanich. It was a private sale, and my “house realtor” was on vacation. I got in touch with the seller on a Friday, and they told me they were expecting to get 2-3 offers over the weekend. Was that a bluff to get me to act? I don’t know, but the seller sounded trustful, so I started to prepare an offer.
I bought and sold several homes before, but I always had my realtor help me. I contacted the delegated colleague, but I quickly got the feeling that he wasn’t very interested in helping me with a private deal.
Just a few weeks earlier I had gone to various Twitter meetings in Victoria, where I met lots of nice people – among them Scott Garman, from http://www.garmanandassociates.com. I was desperate to get some help and contacted Scott. He agreed to help me, even though he knew there was no commission for him. He even refused to take any money, and didn’t ask for anything in return for his help. He provided me with advice on the lot, and created a detailed report to help me compare the lot to other recently sold properties and homes in that area. Scott made me feel more comfortable with the deal, and on Saturday I sent an offer to the seller.
My offer wasn’t the highest, but the sellers were local people, and they liked my idea of building a log home and building a new local business. That’s why they accepted my offer over others, even though I had lots of conditions attached to the offer.
Over the next weeks I worked on removing those conditions: Get an estimate done for the bank, clear financing, make sure no old oil tanks or other obstacles are burried there, and most importantly have lots of talks with the municipality to make sure that I could build the home I was planning to build.
The seller also had some open issues, as they had not fully completed the subdivision process yet, and they had to get the title officially registered. After several weeks all issues were resolved, and I was proud owner of a piece of land in Saanich.
Lot Search Learnings
Here is a summary of things I find important when looking for a building lot:
- Get financing pre-approved before you start you lot search. Otherwise you may end up loosing your “dream lot” to other bidders. If you want to get a “good deal” on any property, you need to be well prepared and act quickly !
- Sewer service: For lots without connection to public sewer systems, make you know where and how you can put in a septic field. Costs can vary drastically depending you your lot, ranging from $5,000 to $20,000 (and higher)
- Hydro/Power: Where is the connection located? Find out what the costs will be to get power to your house. My lot had “all services at the lot line” – but I only found out later, that I still had to get a power pole on my property to connect Hydro. With connection permit costs I payed >$3,000 to get power. If you need multiple poles, a “rule of thumb” would be to calculate around $2,000 per power pole.
- Check development plans for surrounding area: This is probably the most important point. Go to the municipality responsible for your desired lot, and ask them about short and long term plans for anything going on around your desired area. I once looked at a lot with a beautiful ocean view, directly beside a park. Not cheap, but gorgeous. When I talked to the Municipality, they showed me approved plans for the neighbour property to build a 7 story condo complex! No ocean views once that goes up….
Other important aspects to check with your municipality are design and building rules: My lot had a covenant attached with lots of design rules, and I had various discussions to make sure that I could build an EcoLog home.
- Water: Another point for non-serviced lots: You can get water nearly anywhere – but it can be really expensive. I looked at some lots which offered pre-drilled wells. Not bad, I thought – but some research showed, that getting water out of a well can be really expensive, depending on the depth! Get expert advice on the flow capacity, water quality, and costs to get to your water !
- Get expert advice: Review your plans of buying a specific lot with some experts: Get a realtor to help you evaluating the place, and work with your lawyer in reviewing the title and other legal matters around you property !
The overall experience I had was positive. It’s fun to go “property shopping”. In the process you will see many interesting areas, and meet a lot of interesting people.
After completing this part of my new “project”, I now had to focus on creating detailed plans for my new home!
To be continued…