Is it the right time to sell my property?

 

More often than not our clients come to us wanting to sell a property. Any “salesperson” would love to just say “yes!” and convert that sale into a juicy commission. But for us, our priority is being engaged in protecting the best interests of our clients, before anything else! Sometimes selling is actually not the best idea or the right timing after all.

Our first reaction instead is to ask WHY? And again, more often than not, we see that expression of bewilderment on our clients’ face trying to find an answer to this short word. The truth behind their intention can have many reasons: they might think the market is hot and they can just cash out and use the proceeds of the sale – or whatever equity they might have gained – and just spend it; or they actually might think the market is going to crash and they MUST get out right now, move away and never come back, otherwise they will lose everything they’ve built up in the past years. Others have more personal reasons like wanting to “right-size”. Some are thinking about having kids and they currently live at a small place so need more space to accommodate the growing family, or the opposite, others have already done all this and now feel like they’d feel more comfortable with living in a smaller space and not having to worry about maintaining or up-keeping a larger home.

Once we’ve been able to understand and establish the motive behind our client’s interest in selling (or buying if that’s the case as sometimes the sale might also trigger a purchase) then we can provide them with a range of options that allows them to think further about their next step. Is selling really the right decision after all?

Some people have been predicting a bubble for at least the past 8 years in Toronto and yes, we understand, the signs were (are) there, the value of properties was going too high too fast, salaries have not increased at the same pace, it seemed like there was not enough demand to absorb the growing value, foreign people with lots of buying power were apparently driving prices up and the news, by not being as objective or doing proper research, showed the whole city was a ticking bomb, just waiting for that final second to bust the economy.

And yet, those who didn’t purchase anything in, just as a reference, 2012 – when the market seemed to adjust and prices started to fall slightly for a brief period, because of the new mortgage rules introduced in July that year – have seen a bachelor unit – just to name a type of property which serves as an entry point to the market for many – go from $180,000 to above 80% its price or almost doubling it in 2018-2019 *1. We don’t judge them, nor we blame them, we just think some people lacked having the right advisor on their side.

In the end, it’s not about just buying any property, it’s about buying the right property, and for this you need insight and knowledge, you need to also trust the source of advice. Some might even call it luck, just because they don’t want to be proven wrong. *2

Under this scenario, you will sell your property and use the proceeds of the sale for 1) Buying another property, 2) Investing in other markets (not necessarily real estate)  or, 3) Providing your kids with some funds for them to buy real estate, among other possibilities. If you’re selling make sure you’re properly advised and follow the right steps:

• Ask for a Comparative Market Analysis (CMA) that provides you with an idea of the market value of your property, not just a general idea of price.

• Ask for explanations about how the sale process will unfold and how your day- to-day life will be affected.
• Make sure a timeline is provided so you know what to expect.
• Ask for information about the fees involved and what those fees include or not.

 

That means that you don’t sell it but instead you use any equity in it to buy another property and you put your current home for lease.

• Make sure to talk to your mortgage broker in order to confirm how much equity your property has generated since you bought it, to the eyes of the bank; how this equity can be used for the new purchase and how your monthly payments (cashflow) will be affected.
• Make sure to confirm with your Realtor how much rent you can get for your current home so you can run your numbers accordingly.
• Talk to your accountant to confirm how your income tax will be affected based on the new income and the fact that, when you decide to sell this property in the future, there will be a capital gain tax due on it after the date it’s not your principal residence any more.

 

 3. Use the equity or a High Equity Line of Credit attached to your mortgage (if you have access to one) to make any changes/extensions that are possible to your current home:

Renovations can include among others:

• Updating bathrooms/kitchen or any other interior areas that are worth renovating.
• Improving critical systems in the property such as heating and cooling equipment or address structural issues in roofs or walls, or even waterproofing the basement.
• If you have a basement with a separate entrance or walk-out, that you’re currently using as part of your home, look into the possibility of converting it into a rental unit for either long-term or short-term. Make sure to obtain proper advice on short-term rentals as rules  for them in Toronto are still not completely defined and pending the results of a hearing scheduled for August 26th, 2019.  Find more information in this link.
• As of August 2018, the city of Toronto has allowed the construction of laneway suites in Toronto subject to some criteria. If your property fits the profile, you might want to consider building a laneway home and convert it into an income generating property or use it to host a family member. For more information and updates about laneway housing regulation, please visit this link.

Make sure to get the right advice when deciding if a renovation is the way to go. Anticipate and know what your life is going to look like while renovations take place, if you continue living at the property or if you need to move to another place in the meantime. Factor in all the possible expenses and compare it to the possible income you will receive to confirm that you’ll get the best return.

Consider this option if you’re looking to have another home for recreational purposes and if you can afford to pay for it, its mortgage and any additional expenses that are attached to it (maintenance fees – if any, upkeep, property taxes, Etc.)

In the end, sometimes what we think may be the right decision, might be worth looking at in a different way. As Real Estate experts, we love to advise our clients  towards making the very decisions for them and their families. Perhaps in your case it’s time to sell, and perhaps it’s not – depending on the circumstances. We hope our guide can help you to navigate towards your decision. Should you need any further recommendations, feel free to reach out to us directly and we would be happy to help.