Appraisal on a Hobby Farm
For all Realtors who are representing clients purchasing a Hobby Farm, I would like to share this valuable information and experience with you that will benefit your client and relieve unnecessary stress.
I recently represented a client who was downsizing from a $800K home to a 98 acre hobby farm which he purchased for $580K. Needless to say he was very pleased with the fact that his monthly mortgage payments would be significantly reduced and walk away with a profit allowing him to renovate the farm and take advantage of the Ontario Renovation Tax Credit. So far so good!!
The bank ordered an appraisal which was done on the farm and 5 acres only, which is pretty standard for a hobby farm appraisal. The appraisal came back at $140K less than the purchase price. You can well imagine how upsetting this was for my client as he would now have to use the profits of the sale of his house to come up with the difference since the mortgage is based on 20% of the appraised value.
This is how I saved the day with the advice from a fellow Realtor specializing in rural properties, the dedication of three bank representatives and an experienced appraiser. The appraisal should have been coordinated and requested by the Small Business Adviser at the bank. Most banks will have such a person on staff. There is a program in place that allows them to appraise the farm house, the outbuildings and the remainder of the 5 acres. Since it is considered a different mortgage than residential, the banks will require more security. The Small Business Adviser proceeded to order another appraisal which I am happy to say came in over the purchase price. My client is extremely pleased with the outcome and grateful for my persistence and professionalism throughout this long stressful process.
For further information about the program or contact information of all the 'Key People' that made this happen, email me at mrowe@kwottawa.ca or call my direct line at 613-794-2899.