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9 Tips for Buying and Selling Your Home at the Same Time

Selling your home when you still need to shop for a new one can feel daunting to even the most seasoned homeowner––especially when the demand for new homes keeps rising, but the supply feels like it’s dwindling.¹ You’re not alone either if you’re already feeling drained by the complex logistics of trying to sell and buy a new home all at once.

Searching for a new home can be exciting, but many homebuyers admit that it can also be stressful, especially if you live in an unpredictable market with plenty of competitors. Unfortunately, waiting out a competitive housing market isn’t always the best idea either since homes are in notoriously short supply across Canada, and listings are expected to remain limited in the most coveted neighbourhoods for some time.²

That doesn’t mean, though, that you should just throw up your hands and give up on moving altogether. In fact, as a current homeowner, you could be in a better position than most to capitalize on a seller’s market and make a smooth transition from your old home to a new one.

We can help you prepare for the road ahead and answer any questions you have about the real estate market.  For example, here are some of the most frequent concerns we hear from clients who are trying to buy and sell at the same time.

 

“WHAT WILL I DO IF I SELL MY HOUSE BEFORE I CAN BUY A NEW ONE?”

This is an understandable concern for many sellers since the competitive real estate market makes it tough to plan ahead and predict when you’ll be able to move into your next home. But chances are, you will still have plenty of options if you do sell your home quickly. It may just take some creativity and compromise.

Here are some ideas to make sure you’re in the best possible position when you decide to list your home:

 Tip #1: Flex your muscles as a seller.

In a competitive market, buyers may be willing to make significant concessions in order to get the home they want. In some cases, a buyer may agree to a sell and lease back agreement (also known as a “sell house and rent back” option) that allows the seller to continue living in the home after closing for a set period of time and negotiated fee.

This can be a great option for sellers who need to tap into their home equity for a downpayment or who aren’t logistically ready to move into their next home. If you’re dealing with an investor rather than a traditional buyer, you may even be able to negotiate a lengthy lease and lower rent payment than your current mortgage.³

However, leaseback agreements can be complex, with important legal, financial and tax issues to consider.⁴ At minimum, a carefully-worded contract and security deposit should be in place in case of any property damage or unexpected repairs that may be needed during the leaseback period.

 

Tip #2: Open your mind to short-term housing options.

While it can be a hassle to move out of your old home before you’re ready to move into your new one, it’s a common scenario. If you’re lucky enough to have family or generous friends who offer to take you in, that may be ideal. If not, you’ll need to find temporary housing. Check out furnished apartments, vacation rentals and month-to-month leases. If space is an issue, consider putting some of your furniture and possessions in storage.

You may even find that a short-term rental arrangement can offer you an opportunity to get to know your new neighbourhood better—and lead to a more informed decision about your upcoming purchase.

 

Tip #3: Embrace the idea of selling now and buying later.

Instead of stressing about timing your home sale and purchase perfectly, consider making a plan to focus on one at a time. Selling before you’re ready to buy your next home can offer a lot of advantages.

For one, you’ll have cash on hand from the sale of your current home. This will put you in a much better position when it comes to buying your next home. From budgeting to mortgage approval to submitting a competitive offer, cash is king. And by focusing on one step at a time, you can alleviate some of the pressure and uncertainty.

  

“WHAT IF I GET STUCK WITH TWO MORTGAGES AT THE SAME TIME?”

This is one of the most common concerns that we hear from buyers who are selling a home while shopping for a new one, and it’s realistic to expect at least some overlap in mortgage payments. But unless you have a large enough income to comfortably carry two mortgages, you may not pass Canada’s beefed up mortgage stress test until you have a contract on your first home. (You can use the Financial Consumer Agency of Canada’s Mortgage Qualifier Tool to check your odds.⁵)

Assuming you can secure financing, however, it’s still a good idea to examine your budget and calculate the maximum number of months you can afford to pay two mortgages before you jump on a new home. Potential stopgap solutions, such as bridge financing, can also help tide you over if you qualify.

If you simply can’t afford to carry both mortgages for any amount of time, or if you are concerned about passing the mortgage stress test, then selling before you buy may be your best option. (See Tip #3 above.) But if you have some flexibility in your budget, it is possible to manage both a home sale and purchase simultaneously. Here are some steps you can take to help streamline the process:

 

Tip #4: As you get ready to sell, simplify.

You can condense your sales timeline if you only focus on the home renovations and tasks that matter most for selling your home quickly. For example, clean and declutter all of your common areas, refresh your outdoor paint and curb appeal and fix any outstanding maintenance issues as quickly as possible.

But don’t drain unnecessary time and money into pricey renovations and major home projects that could quickly bog you down for an unpredictable amount of time. We can advise you on the repairs and upgrades that are worth your time and investment.

 

Tip #5: Prep your paperwork.

You’ll also save valuable time by filing as much paperwork as possible early in the process. For example, if you know you’ll need a mortgage to buy your next home, get pre-approved right away so that you can shorten the amount of time it takes to process your loan.⁶

Similarly, set your home sale up for a fast and smooth transition by pulling together any relevant documentation about your current home, including appliance warranties, renovation permits, and repair records. That way, you’re ready to provide quick answers to buyers’ questions should they arise.

 

Tip #6: Ask us about other conditions that can be included in your contracts.

Part of our job as agents is to negotiate on your behalf and help you win favourable terms. For example, it’s possible to add a contract condition known as a “subject to sale” or “sale of property” (SOP) condition to your purchase offer that lets you cancel the contract if you haven’t sold your previous home.⁷ This tactic could backfire, though, if you’re competing with other buyers. We can discuss the pros and cons of these types of tactics and what’s realistic given the current market dynamics.

 

“WHAT IF I MESS UP MY TIMING OR BURN OUT FROM ALL THE STRESS?”

When you’re in the pressure cooker of a home sale or have been shopping for a home for a while in a competitive market, it’s easy to get carried away by stress and emotions. To make sure you’re in the right headspace for your homebuying and selling journey, take the time to slow down, breathe and delegate as much as possible. In addition:

 

Tip #7: Relax and accept that compromise is inevitable.

Rather than worry about getting every detail right with your housing search and home sale, trust that things will work out eventually––even if it doesn’t look like your Plan A or even your Plan B or Plan C. Perfecting every detail with your home decor or timing your home sale perfectly isn’t necessary for a successful home sale and compromise will almost always be necessary. Luckily, if you’ve got a good team of professionals, you can relax knowing that others have your back and are monitoring the details behind the scenes.

 

Tip #8: Don’t worry too much if your path is straying from convention.

Remember that rules-of-thumb and home-buying trends are just that: they are estimates, not facts. So if your home search or sale isn’t going exactly like your neighbours’ experience, it doesn’t mean that you are doomed to fail.

It’s possible, for example, that seasonality trends may affect sales in your neighbourhood. So a delayed sale in the summer or fall could affect your journey––but not necessarily. According to the Canadian Real Estate Association, the housing market used to be more competitive during the fall and spring and less competitive during the winter. But it’s not a hard and fast rule and real estate markets across Canada have seen major shifts in recent years.⁸ Every real estate transaction is different. That’s why it’s important to talk to a local agent about your specific situation.

 

Tip #9: Enlist help early.

If possible, call us early in the process. We’ll not only provide you with key guidance on what you should do ahead of time to prepare your current home for sale, we’ll also help you narrow down your list of must-haves and wants for your next one. That way, you’ll be prepared to act quickly and confidently when you spot a great house and are ready to make an offer.

It’s our job to guide you and advocate on your behalf. So don’t be afraid to lean on us throughout the process. We’re here to ease your burden and make your move as seamless and stress-free as possible.

  

BOTTOMLINE: COLLABORATE WITH A REAL ESTATE PROFESSIONAL TO GET TAILORED ADVICE THAT WORKS FOR YOU

Buying and selling a home at the same time is challenging. But it doesn’t have to be a nightmare, and it can even be fun. The key is to educate yourself about the market and prepare yourself for multiple scenarios. One of the best and easiest ways to do so is to partner with a knowledgeable and trustworthy agent.

A good agent will not only help you evaluate your situation, we will also provide you with honest and individually tailored advice that addresses your unique needs and challenges. Depending on your circumstances, now may be a great time to sell your home and buy a new one. But a thorough assessment may instead show you that you’re better off pausing your search for a while longer.

Contact us for a free consultation so that we can help you review your options and decide the best way forward.

 

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    Sources:

    1. Canadian Real Estate Association (CREA) National Statistics –
      https://creastats.crea.ca/en-CA/
    2. Scotiabank Global Economics Housing Note – https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.housing.housing-note.housing-note–may-12-2021-.html
    3. CBC News –
      https://www.cbc.ca/news/canada/toronto/housing-real-estate-toronto-market-sell-stay-rent-1.4075093
    4. Appraisal Institute of Canada – https://www.aicanada.ca/article/possible-valuation-issues-with-life-lease-housing/
    5. Financial Consumer Agency of Canada –
      https://itools-ioutils.fcac-acfc.gc.ca/MQ-HQ/MQ-EAPH-eng.aspx
    6. Government of Canada – https://www.canada.ca/en/financial-consumer-agency/services/mortgages/preapproval-qualify-mortgage.htm
    7. RBC Bank –
      https://www.rbcroyalbank.com/mortgages/selling-buying-home.html
    8. Canadian Real Estate Association – https://www.realtor.ca/blog/are-spring-and-fall-housing-markets-a-thing-of-the-past/20405/1361
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    5 Factors That Reveal Where The Real Estate Market Is Really Headed

    Couple Walking Towards House

    In a July release, the Canadian Real Estate Association reported that home sales had fallen for three months in a row after reaching an all-time high in March.1 So could one of the world’s hottest real estate markets finally be headed for a downturn?

     

    We wouldn’t bet on it. That’s because even though sales have slowed, it was still the strongest June on record—and 13% higher than last year.1

     

    “Don’t be fooled — this is still an extremely strong level of demand,” Bank of Montreal Economist Robert Kavcic told CBC News. “Home sales have backed off extreme levels seen in recent months, but demand is still historically strong and driving strong price growth. We believe that sales activity will continue to gradually cool in the year ahead, but it’s going to take higher interest rates to soften the market in a meaningful way.”1

     

    So what can we expect from Canadian real estate? Here are five factors that illustrate where the housing market is today and is likely heading tomorrow.

     

     

    HOME PRICE INCREASES MAY LEVEL OFF NEXT YEAR

     

    The Canadian Real Estate Association predicts the national average home price will reach $677,774 by the end of 2021, which would be a 19.3% increase over last year. “While market conditions have eased a little in recent months, they nonetheless continue to favour sellers to some extent in virtually all local markets,” the association says.2

     

    But for the remainder of 2021 and into 2022, the association anticipates pricing trends will head toward more normal territory. “Limited supply and higher prices are expected to tap the brakes on activity in 2022 compared to 2021,” according to the association.2

     

    That translates into the association’s forecast of only a 0.6% uptick, to $681,500, in the national average home price for 2022.2 If that happens, it could prompt some buyers who had been reluctant to make purchases this year to enter the market next year.

     

    What does it mean for you?

     

    If you’re a homeowner, now might be the time to look at selling. That’s because the number of available homes continues to be relatively low, and price appreciation has begun to slow. We can help you prepare and market your home to take advantage of the current seller’s market.

     

     

    HOME SALES ARE TAPERING OFF

     

    If the 2021 home market in Canada is a wildfire, then 2022 could be more like a campfire. The Canadian Real Estate Association anticipates a slowdown in home sales activity in 2022 following an extremely busy 2021.3

     

    An estimated 682,900 properties are expected to trade hands through Canadian Multiple Listing Service systems in 2021, which would be an increase of 23.8% from 2020, the association says.3

     

    Next year is shaping up to be much less active, with national home sales forecast to decline 13% to around 594,000 properties in 2022.3

     

    “This easing trend is expected to play out across Canada,” the association says, “with buyers facing both higher prices and a lack of available supply, while at the same time the urgency to purchase a home base to ride out the pandemic continues to fade alongside the virus itself.”3

     

    The “easing trend” is already happening. Across the country, a record-high 69,702 homes were sold in March. But just a month later, the national number of homes sold slipped 12.5% to 60,967.⁴ Home sales volume dropped another 7.4% in May to 56,156.⁵

     

    “One of the world’s [most active] housing markets appears to be slowing down,” the Bloomberg news service proclaimed in June in a report about the Canadian home market.⁶

     

    What does it mean for you?

     

    Are you struggling to buy a home in today’s highly competitive market? If so, 2022 might be a good time to pursue a purchase because you may face less competition. However, one drawback of waiting is that mortgage rates are expected to go up. We can help put you on the right path toward homeownership, whether you want to buy now or next year.

     

     

    SUPPLY OF HOMES REMAINS LOW

     

    The housing shortage in Canada persists.

     

    Before the pandemic, the number of available homes nationally sat at a 14-year low and the number of months of inventory had fallen below four months, according to the Canadian Real Estate Association.3

     

    Inventory below four months puts the supply in “seller’s market territory,” the association says.3 Inventory refers to the number of months it would take for the current supply of homes on the market to be sold at the existing pace.⁷

     

    In June, the Canadian Real Estate Association reported the national inventory of available homes was close to two months, reflecting an “unprecedented imbalance of supply and demand.”3 National inventory hit a record low of 1.7 months in March, compared with the long-term average of more than five months.⁷

     

    “At a time where so many markets are struggling with historically low inventory, sales activity depends on a steady stream of new listings each month,” the association says.⁷

     

    What does it mean for you?

     

    A tight supply of available homes puts sellers in a strong position as long as demand stays high. So, if you’re a homeowner, placing your home on the market when demand exceeds supply could bring you a higher price. We can help you figure out when to sell so that you extract the maximum value from your home.

     
     

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      HOME CONSTRUCTION ON THE VERGE OF STABILIZING

       

      Newly built homes add, of course, to the supply of homes available to buyers. And it appears that home construction in Canada is on the upswing.⁸

       

      For all of 2021, construction is projected to begin on as many as 230,000 new homes in Canada, up from a little over 217,800 in 2020, according to the Canada Mortgage and Housing Corp. (CMHC). Even more homes could get underway in 2022 (as many as 234,500) and 2023 (231,900).⁸

       

      “Housing starts will stabilize at levels consistent with household formation by the end of 2023,” according to CMHC.⁹

       

      What does it mean for you?

       

      More newly built homes coming on the market could mean an opportunity for buyers, as construction boosts the supply of available properties and eases the strain on demand. Bottom line: An influx of new homes may open more doors to homeownership. We can give you a hand in locating a new or existing home that fits your budget and your needs.

       

       

      MORTGAGE RATES ARE SET TO RISE

       

      Low mortgage interest rates help entice buyers to make a home purchase. That’s certainly been the case in Canada in recent months. However, mortgage rates are poised to creep up this year and next year, and even into 2023.10

       

      An analysis from Mortgage Sandbox indicates five-year Canadian mortgage rates are expected to remain low by historical standards, but they are expected to continue rising in 2022 and 2023. The analysis indicates the fixed rate for a five-year mortgage could climb to 3% in the third quarter of 2022.¹¹

       

      Low mortgage rates typically make it easier for homebuyers to qualify for a mortgage, as well. But on June 1, the Office of the Superintendent of Financial Institutions raised the mortgage “stress test” qualifying rate from 4.79% to 5.25%.12

       

      According to the Toronto Sun, “It was intended in part to slow down the overheated housing market and likely in part because inflation (and higher interest rates) are on the horizon.”12

       

      In a recent report, the British Columbia Real Estate Association forecast, “rising Canadian inflation — and the extent to which that inflation is a temporary phenomenon — is set to shape how rates evolve over the next year.”13

       

      What does it mean for you?

       

      Given the prospect that Canadian mortgage rates may go up during the rest of this year and into 2022, now might be the right time to think about borrowing money to buy a home. When interest rates rise, you pay more to borrow money. Whether you’re buying a new home or up for a renewal, you can lower your risk by locking in a fixed-rate rather than variable-rate mortgage.

       

       

      ARE YOU THINKING OF BUYING OR SELLING?

       

      It can be tough to sort out the Canadian housing market—where are home prices heading, are mortgage rates going up, is it the right time to buy or sell? We can help you answer all of those questions, and more. We then can work with you to come up with a plan tailored to your unique situation. Let us be your partner in the home-buying or home-selling journey.

       

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        Sources:

         

        1. CBC –
          https://www.cbc.ca/news/business/crea-june-stats-1.6103715
        2. Canadian Real Estate Association –
          https://www.crea.ca/housing-market-stats/quarterly-forecasts/
        3. Canadian Real Estate Association – https://www.creacafe.ca/quarterly-forecast-housing-activity-to-continue-easing-over-second-half-of-2021-and-into-2022/
        4. Global News –
          https://globalnews.ca/news/7868251/canada-home-sales-down-april/
        5. Global News –
          https://globalnews.ca/news/7950863/canada-home-sales-may-crea/
        6. Bloomberg – https://www.bloomberg.com/news/articles/2021-06-15/canada-housing-worlds-second-bubbliest-market-starts-to-look-fatigued
        7. Canadian Real Estate Association –
          https://creastats.crea.ca/en-CA/
        8. Canada Mortgage and Housing Corp. – https://assets.cmhc-schl.gc.ca/sites/cmhc/professional/housing-markets-data-and-research/market-reports/housing-market/housing-market-outlook/2021/housing-market-outlook-61500-spring-2021-en.pdf
        9. Canada Mortgage and Housing Corp. – https://www.cmhc-schl.gc.ca/en/blog/2021/housing-markets-expected-moderate-risks-remain
        10. Global News –
          https://globalnews.ca/news/7962282/rising-interest-rates-canadas-housing-market/
        11. Mortgage Sandbox –
          https://www.mortgagesandbox.com/mortgage-interest-rate-forecast
        12. Toronto Sun –
          https://torontosun.com/opinion/columnists/wild-new-stress-test-rate-makes-it-more-difficult-for-home-buyers-to-qualify-for-mortgage
        13. British Columbia Real Estate Association – https://www.bcrea.bc.ca/wp-content/uploads/mortgagerateforecast.pdf

         

         

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        How to Bridge the Appraisal Gap in Today’s Real Estate Market

        If you’re searching for drama, don’t limit yourself to Netflix. Instead, tune in to the real estate market, where the competition among buyers has never been fiercer. And with homes selling for record highs,1 the appraisal process—historically a standard part of a home purchase—is receiving more attention than ever.

         

        That’s because some sellers are finding out the hard way that a strong offer can fizzle quickly when an appraisal comes in below the sales price. Thus, many sellers favour buyers who can guarantee their full offer price—even if the property appraises for less. For the buyer, that could mean a large down payment or extra cash on hand to cover the gap.

         

        Whether you’re a buyer or a seller, it’s never been more important to understand the appraisal process and how it can be impacted by a quickly appreciating and highly competitive housing market. It’s also crucial to work with a skilled real estate agent who can guide you to a successful closing without overpaying (if you’re a buyer) or overcompensating (if you’re a seller). Find out how appraisals work—and in some cases, don’t work—in today’s unique real estate environment.

         

         

        APPRAISAL REQUIREMENTS

         

        An appraisal is an objective assessment of a property’s market value performed by an independent licensed appraiser. Mortgage lenders use appraisals to lower their risk of loss in the event a buyer stops paying their loan. It provides assurance that the home’s value meets or exceeds the amount being lent for its purchase.

         

        In certain circumstances, an appraisal can be avoided. For example, when a buyer purchases mortgage insurance because they have a down payment of less than 20%. In that instance, the mortgage insurance would cover the lender’s loss in a case of default. Or, if a buyer makes a large down payment, a lender may waive their right of appraisal.2

         

        Additionally, sometimes a lender will use an automated valuation model (AVM) to estimate a property’s value. According to the Appraisal Institute of Canada, “AVMs are computer programs that provide real estate market analysis and estimates of value.” If the sales price falls comfortably within the AVM’s range of value, a lender may skip the formal appraisal.3

         

        However, in the event a formal appraisal is required, it will need to be conducted by a licensed and authorized appraiser. In most cases, the appraiser will analyze the property’s condition and review the value of comparable properties that have recently sold. Using this information, they will determine the home’s current market value. Mortgage borrowers are usually expected to pay the cost of an appraisal.2

         

         

        APPRAISALS IN A RAPIDLY SHIFTING MARKET

         

        Problems can arise when the appraisal comes in lower than the sales price. And while low appraisals are not common, they are more likely to happen in a rapidly appreciating market, like the one we’re experiencing now.4 That’s because appraisers use comparable sales (commonly referred to as comps) to determine a property’s value. These could include homes that went under contract weeks or even months ago. With home prices rising so quickly, today’s comps may be lagging behind the market’s current reality. Thus, the appraiser may be basing their assessment on stale data, resulting in a low valuation.5

         

        According to Kevin Lonsdale, Executive Director of the Canadian National Association of Real Estate Appraisers, the best valuations should be based on “data, not emotion. This emotional process where people are outbidding each other creates a disconnect and that then becomes a comparable six months down the road. It’s very difficult to value properties based on what the market wants to pay for them.”6

         

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          Unit #

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          HOW ARE BUYERS AND SELLERS IMPACTED BY A LOW APPRAISAL?

           

          In a balanced market, a financing condition is a standard inclusion in a home purchase offer. It enables the buyer to make the closing of the transaction dependent on their ability to secure a mortgage. And in many cases, the loan is contingent on a satisfactory appraisal, wherein the value of the property is at or near the purchase price.

           

          But in today’s market, sellers often hold the upper hand because the current demand for homes exceeds the available supply. That’s why many buyers are choosing to exclude the financing condition altogether, as a way to sweeten their offer in a competitive bidding process.5

           

          However, this approach can leave a buyer vulnerable if the appraisal comes back lower than expected. Without a financing condition, the buyer will be obligated to come up with enough cash to bridge the gap between the contract price and the appraised value—or be forced to walk away from the transaction and potentially lose their deposit.

           

          It may seem, then, that a buyer carries the sole risk of a low appraisal. However, the sellers will have wasted time and money with little to show for it. And they run the risk that the market may have cooled or interest in their home may have waned by the time they relist.

           

          Sellers should keep this in mind when evaluating offers. The offer price should never be the sole consideration. We weigh a range of factors when advising our clients, including a buyer’s conditions, mortgage qualifications, financial resources, and deposit size, among others.

           

          According to Lonsdale, overheated blind bidding in Canadian real estate means that there is additional pressure on everyone involved in the transaction. With a tight timeline, there’s not always enough time for proper due diligence, putting stress on the transaction and on the buyer and seller involved.6

           

           

          MITIGATE YOUR RISK WITH THE BEST REPRESENTATION

           

          There’s never been a market quite like this one before. That’s why you need a master negotiator on your side who has the skills, instincts, and experience to get the deal done…no matter what surprises may pop up along the way. If you’re a buyer, we can help you compete in this unprecedented market—without getting steamrolled. And if you’re a seller, we know how to get top dollar for your home while minimizing hassle and stress. Contact us today to schedule a complimentary consultation.

           

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            The above references an opinion and is for informational purposes only.  It is not intended to be financial advice. Consult the appropriate professionals for advice regarding your individual needs.

             

            Sources:

            1. Financial Post –
              https://financialpost.com/real-estate/canadian-home-sales-prices-surge-to-new-record-in-march
            2. ca –
              https://mortgages.ca/what-you-should-know-about-home-appraisals
            3. Appraisal Institute of Canada –
              https://professional.sauder.ubc.ca/re_creditprogram/course_resources/courses/content/452/AVMPositionPaper.pdf
            4. Teranet–National Bank House Price Index™ –
              https://housepriceindex.ca/#maps=c11
            5. The Globe and Mail –
              https://www.theglobeandmail.com/business/article-rapid-increase-in-home-prices-puts-buyers-in-bind-when-appraisals-dont/
            6. Personal Interview: Kevin Lonsdale, Executive Director, Canadian National Association of Real Estate Appraisers. 4 Jun 2021.
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            Could Rising Home Prices Impact Your Net Worth?

            Learn how to determine your current net worth and how an investment in real estate can help improve your bottom line.

            Among its many impacts, COVID-19 has had a pronounced effect on the Kitchener-Waterloo housing market. Low home inventory and high buyer demand have driven home prices to an all-time high.1 This has given an unexpected financial boost to many homeowners during a challenging time. However, for some renters, rising home prices are making dreams of homeownership feel further out of reach.

            If you’re a Kitchener-Waterloo homeowner, it’s important for you to understand how your home’s value contributes to your overall net worth. If you’re a renter, now is the time for you to figure out how homeownership fits into your short-term goals and your long-term financial future. An investment in real estate can help you grow your net worth, build wealth over time, and gain a foothold in the housing market to keep pace with rising prices.

             

            What is net worth?

            Net worth is the net balance of your total assets minus your total liabilities. Or, basically, it is what you own minus what you owe.2

            Assets include the cash you have on hand in your chequing and savings accounts, investment account balances, salable items like jewelry or a car and, of course, your home and any other real estate you own.

            Liabilities include your total debt obligations like car loans, credit card debt, the amount you owe on your mortgage, and student loans. In addition, liabilities would include any other payment obligations you have, like outstanding bills and taxes.

             

            How do I calculate my net worth?

            To calculate your net worth, you’ll want to add up all of your assets and all of your liabilities. Then subtract your total liabilities from your total assets. The balance represents your current net worth.

            Total Assets – Total Liabilities = Net Worth

            Ready to calculate your net worth? Contact us to request an easy-to-use worksheet and a free assessment of your home’s current market value!

            Keep in mind that your net worth is a snapshot of your financial position at a single point in time. Your assets and liabilities will fluctuate over both the short term and long term. For example, if you take out a loan to buy a car, you decrease your liability with each payment. Of course, the value of your asset (the car) will depreciate over time, as well. An asset that is invested in stocks or bonds can be even less predictable, as it’s subject to daily fluctuations in the market.

            As a homeowner, you enjoy significant stability through your monthly real estate investment, also known as your home mortgage payment. While the actual value of your home can fluctuate depending on market conditions, your mortgage payment will decrease your liability each month. And unlike a vehicle purchase, the value of your home is likely to appreciate over time, which can help to grow your net worth. Right now, your Kitchener-Waterloo asset may be worth significantly more than it was this time last year.3

            If you’re a Kitchener-Waterloo homeowner, contact us for an estimate of your home’s market value so that you can factor it into your net worth calculation. If you’re not a current homeowner, let’s talk about how homes in our area have appreciated over the last several years. That way, you can get an idea of how a home purchase could positively affect your net worth.

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              How can real estate increase my net worth?

              When you put your real estate dollars to work, it’s possible to grow your net worth, generate cash flow, and even fund your retirement. We can help you realize the possibilities and maximize the return on your investment.

               

              Property Appreciation

              Generally, property appreciates in one of two ways: either through changes to the overall market or through value-added modifications to the property itself.

               

              1. Rising prices

              This type of property appreciation is the one that many homeowners are enjoying right now. Buyer demand is at an all-time high due to a combination of low interest rates and limited housing inventory.At other times, rising home prices have been attributed to different factors. Certain local conditions—like a new commercial development, influx of jobs, or infrastructure project—can encourage rapid growth in a community or region and a corresponding rise in home values. Historically, home prices have been shown to experience an upward trend punctuated by intermittent booms and corrections.5

               

              2. Strategic home improvements

              Well-planned and executed home improvements can also impact a home’s value and increase homeowner equity at the same time. The type of home improvement should be appropriate for the home and in tune with the desires of local buyers.

              For example, a tasteful exterior remodel that is in keeping with the preferences of local home buyers is likely to add significant value to a home, while remodelling the home to look like the Taj Mahal or a favourite theme park attraction will not. A modern kitchen remodel tends to add value, while a kitchen remodel that is overly expensive or personalized may not provide an adequate return on investment.

               

              Investment Property

              You may be used to thinking of investments primarily in terms of stocks and bonds. However, the purchase of a real estate investment property offers the opportunity to increase your net worth both upon purchase and year after year through appreciation. In addition, rental payments can have a positive impact on your monthly income and cash flow. If you currently have significant equity in your home, let’s talk about how you could put that equity to work by funding the purchase of an investment property.

               

              1. Long-term or traditional rental

              A long-term rental property is one that is leased for an extended period and typically used as a primary residence by the renter. This type of real estate investment offers you the opportunity to generate consistent cash flow while building equity and appreciation.6

              As an owner, you don’t usually have to worry about paying the utility bills or furnishing the property—both of which are typically covered by the tenant. Add to this the fact that traditional tenants translate into less time and effort spent on day-to-day property management, and long-term rentals are an attractive option for many investors.

               

              2. Short-term or vacation rental

              Short-term rentals are often referred to as vacation rentals because they are primarily geared towards recreational travellers. And as more people start to feel comfortable travelling again, the short-term rental market is poised to become a more popular option  than ever in certain markets. In fact, with travellers continuing to seek out domestic options in lieu of international travel, this may be the perfect time to consider an investment in a short-term rental property.7

              Investing in a short-term rental offers many benefits. If you purchase an investment property in a top tourist destination, you can expect steady demand from travellers while taking advantage of any non-rented periods to enjoy the home yourself. You can also adjust your rental price around peak demand to maximize your cash flow while building equity and long-term appreciation.

              To reap these benefits, however, you’ll need to understand the local laws and regulations on short-term rentals. We can help you identify suitable markets with investment potential.

               

              WE’RE HERE TO HELP

              Ready to calculate your personal net worth? Contact us for an easy-to-use worksheet and to find out your home’s current value. And if you want to learn more about growing your net worth through real estate, we can schedule a free consultation to answer your questions and explore your options. Whether you’re hoping to maximize the value of your current home or invest in a new property, we’re here to help you achieve your real estate goals.

               

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                The above references an opinion and is for informational purposes only.  It is not intended to be financial advice. Consult the appropriate professionals for advice regarding your individual needs.

                Sources:

                1. Financial Post – https://financialpost.com/real-estate/canadian-home-sales-prices-surge-to-new-record-in-march
                2. Forbes – https://www.forbes.com/advisor/investing/what-is-net-worth/
                3. Global Property Guide – https://www.globalpropertyguide.com/North-America/Canada/Price-History
                4. Canadian Real Estate Association – https://creastats.crea.ca/en-CA/
                5. Trading Economics – https://tradingeconomics.com/canada/housing-index
                6. Canadian Apartment – https://www.reminetwork.com/articles/hopeful-outlook-for-canadas-rental-market/
                7. MoneySense – https://www.moneysense.ca/spend/real-estate/is-now-the-time-to-buy-a-vacation-home/

                 

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                A Semi-Detached In Kitchener Sold For $301,000 Over Asking Price

                The media has been all over this one. A semi-detached home in Kitchener which was listed for $500,000 has sold for $801,000 and the media has been all over it. At first glance this seems like an outrageous price, why would someone overpay by $300,000? However, once you start looking at the whole picture and breaking down the details it starts to make a little more sense. So let’s properly break down what happened here, and try to understand why someone’s realtor felt it was a normal price to pay for this property.

                The first issue with everything we’ve been seeing in the media, and all of the social media snapshots being shared (like the one above), is that it doesn’t show the whole picture. We don’t get any details about the home itself, and we don’t get any details on what semi-detached homes have been selling for in the area recently. We just get the shock factors which are the low list price, high sale price, and outrageous number of offers. Doom, gloom, and shock! By the end of this article you’ll understand why all of these numbers make perfect sense (except maybe the list price).

                The Subject Property

                Let’s start by looking at the details of the subject property first. It was a renovated semi-detached home, with a walk-out basement (nice bonus), backing onto green space (now we’re talking!), and had potential for an in-law suite in the basement! An in-law suite is like an accessory apartment with its own entrance, kitchen, bathroom, living space, and bedroom. That is a huge bonus as it’s almost like you’re buying two properties in one. It’s ideal for an income helper, or for a large family/shared living setup. Either friends could buy this together and split costs, or a multi-generational family could live here while each having their own separate space. This is a huge bonus of the property which is rarely mentioned in these dramatic posts being shared.

                In addition to the potential in-law setup, the home backs onto green space, which means no neighbours and beautiful views! Not many homes in our city have this added privilege, and when you are buying from a builder they charge anywhere from $50,000-$100,000 as a lot premium for properties which back onto green space or have view of green space. Another huge bonus not being mentioned anywhere.

                Understanding The Market

                Now, without understanding what’s going on in the market it’s difficult to assess whether or not someone paid an outrageous price for the property. So we have assessed the subject, but now we need to compare it to what is happening in the market. For example, someone buying a semi-detached property with an in-law suite in Toronto and paying $300,000 over asking doesn’t mean anything without the final price. If this hypothetical Toronto buyer secured that property for $801,000 that would be an amazing deal! Even if they paid $500,000 over asking, as long as the final sale price is $801,000 it does not affect how good of a deal it was.

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                  This whole $300,000 over asking is just a fancy shock factor. The number that matters is the final sale price, and how it compares to the market for similar properties. This is because the starting price is almost irrelevant. There have been semis which sold for $860,000, heck there was even a semi-detached that sold for $967,000, but they don’t make the news because the starting price was close to the sale price, and $50,000-$60,000 over asking just isn’t shocking enough and click-worthy for the media to run ads on it.

                  So let’s understand the market, the average price of a semi-detached home in the West end of Kitchener is $720,000. Now we have something to compare the sale price to, and to explain some of the shocking numbers being gloated on social media.

                  Analyzing The Sale

                  Let’s start by agreeing that based on the details of this property it was an above average property. It backs onto green space ($50k-$100k value), and it has potential for an in-law suite ($1,200/month in rent = $14,400 yearly value).

                  The final sale price of $801,000 is $81,000 above the average sale price of a semi-detached. But the home arguably has over $100,000 in added value above the average semi-detached property. When we assess it with all of the facts, this buyer got a fair deal if not a great deal!

                  Let’s break down some of the other shocking numbers: $301,000 above asking, and 53 offers.

                  The starting price was $500,000- that’s $220,000 below the market average. That’s more than 70% of the shocking $301,000 over asking being made up for by the home being listed way under the market average, let alone the other bonus factors the property had. This also explains the shocking 53 offers. Of course it had 53 offers, I’m surprised it didn’t have 100 offers. The home was listed for $220,000 under the market average, every buyer looking for a property right now knew that was a great deal. Any agent who did their homework knew that their clients had to pay above the average price for this property.

                  Conclusion

                  Starting price doesn’t matter, the amount over asking doesn’t matter, the media loves to flash these numbers because they are shocking and entertaining but they are irrelevant. What matters are the details of the home, current market conditions, the final sale price and how it compares to the others.

                  Once we filter out the noise and focus on the important facts we can clearly see that in this case the buyer paid a fair value for what they got.

                  Got questions? Agree or disagree? Let us know!

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                    Record Breaking Real Estate Prices in January 2021 – Kitchener-Waterloo Market Report

                    Kitchener-Waterloo February 2021 Real Estate Market Report

                    While the real estate market has been extremely “hot”, it apparently isn’t doing much to warm up the weather outside. I hope you’ve been doing well and keeping safe during this winter madness!

                    In January 2021 we saw 310 residential properties sell, compared to 314 in December of 2020, and 240 in January of 2020. Typically both December and January are “slow” months for real estate in Kitchener-Waterloo. This is mainly due to the holiday season, and then the post-holiday recovery.

                    However, this year we have seen an increase in sales during both of those months. One of the reasons is due to the COVID restrictions. With folks not being allowed to visit families and friends over the holidays they have had a lot more time to continue shopping for homes. Another reason is the increased demand in the region. With our population continuing to grow, and the region adding more and more tech jobs, we are going to see a continued increase in demand and sales.

                    With spring around the corner, and the COVID restrictions in the region loosening up, I expect that this trend will continue into the typically busy spring market as the snow melts and we shed our winter coats. If the early start to the year has been any indication of what’s to come, the spring market is going to be one for the ages!

                    So does this mean prices are going up?

                    At the time of writing this there are only 190 properties available for sale in Kitchener-Waterloo across ALL property types, and only 92 freehold detached homes. Given that there were 310 properties sold in January, and there are only 190 available for sale right now, I would say we have a serious supply problem. If no new homes came on the market, Kitchener-Waterloo would be sold out in less than 1 month. That is a serious supply and demand recipe for a jump in prices. Combine it with the historically low interest rates, and yes price will go up- A LOT!

                    How much have the prices gone up?

                    The average sale price across all residential properties in January 2021 was $666,325 which is a year-over-year increase of 22.88% compared to the January 2020 average of $542,256, and a 7.6% increase compared to December 2020 ($619,068). The average sale price for detached homes in January 2021 was a staggering $830,402. Up 26.7% compared to $655,423 in January 2020. Prices are up, and they are up significantly compared to last year! As mentioned earlier this is due to the supply and demand factors, and an increase in demand due to lower interest rates (among other increases to demand in the region).

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                      The average number of days to sell in January 2021 was 22, compared to 33 in January 2020. So once again, homes are selling fast, and the main driving force is the increase in demand and the persistent low supply of homes.

                      Below is a chart representing average sale prices of detached homes in KW:

                      As you can see the prices continue to be on an upward trend, and we expect this to continue throughout the rest of the year barring some unforeseen circumstances.

                      Taking a look at semi-detached homes:

                      Very similar to what we saw with detached properties. Sloping upwards and indicating a price increase trend.

                      Taking a look at townhomes:


                      Townhomes are also showing an upward trend, indicating prices are increasing.

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                      Apartments:

                      Condo apartments are a bit more difficult to represent in a single graph, for a wide variety of reasons, and they could have their own market report dedicated with the amount of content required. For illustration purposes the above graph is showing the sale price of 1-bedroom condos. Condos have danced around on the charts but are starting to show a positive upward trend in recent months.

                      Part of the reason condos are difficult to represent on a graph is due to so many small factors which play a role. For example condos range from 1-3 bedrooms which greatly affects the sale price, and if one month there are more sales of one than the other it will skew the graph. Another factor in condo prices are condo fees. A 1-bedroom condo with a $500 condo fee will sell for a lot less than the same condo with a $300 condo fee. This makes it difficult to assess the accuracy/representation of any single month. If you have questions about a specific condo building please feel free to reach out and I will be happy to provide further details.

                      View Homes For Sale in Kitchener-Waterlooo

                      Wrapping it up:

                      I’m sounding like a broken record at this point, but as we can see from all of the details above, the KW market is in high demand and appears to have a continuing upward trajectory in terms of prices. As has been the story for the last year we are plagued by low inventory for homes, meaning we are in desperate need of homes for sale. Between the inventory levels, low interest rates, and increasing demand, I expect prices will continue to see gains throughout the near future and likely the rest of 2021.

                      While this is great news for the local market sellers, it’s still important to proceed with caution. Practice safe social distancing, wear face covers as much as possible, and avoid unnecessary trips by taking advantage of virtual tours only visiting homes which are very likely to work for you.

                      For potential buyers this type of market can be very difficult to navigate, and it’s rather disheartening when it comes to offering on properties. We are once again seeing homes get 20-30 offers, and this means there are up to 29 disappointed buyers each time around. Acting quickly and having all of the necessary arrangements in advance will help your chances, but persistence will also be a determining factor. It can be difficult to continue when you’ve lost 4-5 properties in a row, but having the right team behind you will eventually result in success!

                      If you are curious about your home’s value you can check out our instant home evaluation tool by clicking here.

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                        7 Tips to Instantly Increase Your Home’s Value



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                        3 Quickest Ways To Increase The Value Of Your Home

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