When people have made the decision to sell, they sometimes roll the contents into the cottage purchase. Indeed, many cottage owners accumulate things over the years that they no longer need or want once they’ve sold the property and have left cottage life behind them for good. All kinds of “included with” items can become part of the real estate purchase – everything from kitchen tables and chairs to bunk beds, canoes, television sets, snowmobiles, bedding, and kitchen utensils.
The seller can also avoid the burden of moving everything off the property by selling the cottage with its contents. After all, it can be especially complicated to clear things from the cottage when the property is difficult to access. The seller makes a clean break with the cottage and everything inside it by rolling the cottage contents into the purchase price - allowing the buyer to decide what will stay, what will go, and whether something will be taken to a landfill or sold to a third party.
So is the “with contents” cottage purchase a good deal for you?
If you decide to pursue a “with contents purchase,” you should consider your ultimate plans for all of those extras. Indeed, you should think beyond the resale value of the items that come with the cottage and consider the cost, time, and hassle involved in purging your new cottage of the things you don’t want and the expense involved in replacing them. As a potential buyer, you will need to think carefully about your financial outlay to replace inherited furnishings with new furniture, along with the expense to transport these purchases to your new cottage. It can be costly to remove large, bulky items that you don’t want to replace. For example, getting rid of the ancient chest-freezer that hogs energy and floor space in the mud room will involve more than simply hauling it to the curb. You will have to pay extra and make arrangements for the city’s waste management crew to pick up the freezer. And if you’re buying a cottage on an island or the property is difficult to access, the task of getting rid of such things as large, heavy appliances becomes trickier and more expensive. If you really don’t want a particular item to be thrown in with the cottage purchase, you don’t have to agree to take it even though it is free. I’ve walked into a cottage after a “with contents” deal to purchase the property has been sealed and thought about the buyer’s incred-inline-blockle luck – as my eyes settled on antique cast iron beds, vintage wicker furniture, dressers, harvest tables, beveled mirrors and turn-of-the century ironstone pitchers. In fact, cottages are often repositories for antiques and vintage pieces that have been collected and enjoyed over generations within a family. Although you may not want to keep some of the furniture or the smaller items – they may be hot pieces at auctions or on websites like Craigslist and eBay. Perhaps the milky green glass dishes in the kitchen cupboard aren’t your cup of tea but they may fetch hundreds of dollars since they’re collectible Jadeite from the 1940s and 1950s. Or maybe you don’t swoon over mid-century modern furnishings and would like to part with the cottage’s 1960s Danish teak furniture. Well, someone else will be willing to pay a significant sum for it. Given the popularity of websites like Craigslist and Kijiji, you don’t have to ship the item you want to sell to a customer who lives faraway. In fact, the prospective buyer would make arrangements with you to see the item in person after viewing your photos of the item online and reading your description of the item. If they decide to buy it, they pay you cash and cart the item away in their car or truck, which means that you can transfer the transportation burden to someone else.
“When a buyer is seriously considering two cottages, the cottage that comes with its contents will often tip the balance,” says Gail McCormack.
Indeed, the “with contents” cottage is a turn-key recreational getaway that allows the buyer to enjoy the property and make the most of the current recreational season right after the buyer has assumed possession. When contents are included, “kitchens are often equipped right down to the pots, pans, dishes, and cutlery,” adds McCormack. “A turn-key cottage is a nice start for a lot of people,” she points out.
A cottage with fuss-free furnishings enables you to start enjoying the cottage lifestyle right away and they buy you time to flip through the pages of magazines, contemplate how you want to furnish the cottage, and perhaps wait for the next retail sales cycle. Although the deal to purchase the cottage may include its contents if there are things you really want, make sure your agent itemizes them and incorporates them into an agreement to purchase to avoid disappointment.
Mortgages and covering the gap between purchase price and appraised value
If you need to secure a mortgage your financial institution will only consider the appraisal value of the cottage property and not the total sum you’ve agreed to pay the seller. High-ticket items like antique furniture and large, powerful boats can add up to create a significant differential between the purchase price for the cottage and the appraised value for the purposes of securing a mortgage. Although you might pay $500,000 for a turn-key cottage complete with furnishings from Ethan Allen and high-performance water toys, the appraised value of the real estate may only be $465,000. As a result, you may need to seek out other forms of financing – like a line of credit – to cover the differential between the money you will pay the seller and the appraisal value in order to close the purchase. In the most successful real estate transactions, the higher-price extras are distinguished from the real estate purchase, bundled together, and assigned a separate value by the seller. In other words, the real estate negotiations unfold based on the listing price, which is founded on the appraised value of the property, and may include some furnishings. At the same time, the seller offers the buyer a chance to purchase a litany of items – from a snow-blower, lawn tractor, chain saw, and power tools to a motor boat and canoe – for an extra $25,000. It is then up to the buyer to decide whether he or she is willing to pay $25,000 for the additional items. The buyer can accept or decline the offer or attempt to negotiate the price of the bundled contents with the seller. Incidentally, chattels (moveable possessions and personal property) are technically subject to the Harmonized Sales Tax (HST) when they are sold, while the property itself is not (assuming it is a resale). When chattels are bundled with the property sale and there is no value attributed to the chattels, HST will usually be avoided on the chattels. However, if chattels are sold in a separate transaction, it would usually not be possible to avoid HST on the value assigned to them.
Be careful with boats that come with the package
Whether you negotiate the purchase of a powerboat separately or it is included in the real estate deal you should have the boat examined by a mechanic as engine repairs or structural problems can be very costly to address. Straightforward boats, like aluminum boats with small motors, are not problematic as the potential repair costs are less onerous. If you decide to purchase a boat separately from the seller, investigate what those boats are being sold for on sites such as Craigslist or at local marinas. You may want a boat, but you needn’t pay a price above its market value. And remember that boats and trailers, etc. must be registered by the new owner and HST will be payable upon registration if it has not been remitted previously. In the end, you shouldn’t have to assume ownership of things you really don’t want or need. But if it’s a strong seller’s market, the seller may have the upper hand and you may need to take on the property with all of its contents – including those things you don’t want – to close a real estate deal.
Nonetheless, there are many advantages to a “with contents” purchase and such cottages often edge out competition from comparable cottages offered for sale without contents.
Photo courtesy of RichardBH No Alterations Made - Creative Commons
