Whether you’re upsizing, downsizing, or choosing to rent for a while to weigh your options or wait for the market to cool, here are some things to think about before you decide to put your home on the market.
Before you list
Consider these questions:
- How much equity do I have in my home? The costs of selling your home can outweigh the equity you’ve established if you’ve only owned your home for a short time. Even in a hot market you may not be ahead by much after you factor in the costs of selling. But ultimately the decision to sell your home is driven by your personal circumstances and your reasons for moving.
- What are the tax implications of selling my home? In Canada, homeowners who sell their principal resident may benefit from substantial tax-free gains thanks to the principal residence exemption. But if the Canada Revenue Agency (CRA) determines that you are regularly flipping homes, you may be denied this exemption. What’s more, you could be taxed on any profits as 100 percent taxable business income.
- Am I emotionally ready? If you’ve lived in your current home for some time, you likely have associated memories – it can be hard to leave that behind. Doing the emotional work beforehand will help make the process easier. That means looking at your home’s flaws (too small, too far away from work etc.) and being at peace with your reasons for moving, before you list.
Don’t forget the ‘hidden’ fees
Here’s what you might expect to pay when you sell your home.
Realtor fees (between 3% and 7% of the sale price) The realtor fees, or commission, come out of the sale price of your home. You typically pay this fee to your real estate agent to list the property, as well as to the agent who represents the buyer.
Home staging ($1,000 – $5,000, depending on size of home) Many real estate agents will cover the cost of this service, but you may still be on the hook for the cost of temporarily moving and storing some of your belongings.
Home appraisal ($300-$500) You may want to consider having your home appraised to help you understand what it’s worth and how to price it appropriately. Your real estate agent can provide a market assessment of your home, or you can obtain an appraisal through a third-party company.
Mortgage penalties (varies) – if you have an existing mortgage on your home, you may be charged thousands to break it. Because you’re essentially breaking your loan contract, a penalty compensates your lender. The type of mortgage you have will affect how much you pay in fees. For example, if you have a variable mortgage your lender will generally charge you three months’ worth of interest. With a fixed-rate loan however, your penalty will be much higher depending on the size of your mortgage balance.
Legal fees (at least $1500) – Costs can vary, but a more complex sale may result in higher legal fees.
Talk to your financial advisor to get a full picture of your finances
Your Richardson Wealth Investment Advisor can help you evaluate the financial and tax considerations before you list your home, and help you make decisions about how to use the proceeds depending on your goals and your overall wealth plan. Talk to us today.