Since the Ontario Fair Housing Plan was announced almost two months ago, we’ve been witnessing a change in Toronto’s real estate market. On the heels of months of low inventory, ridiculous bidding wars, and double-digit price appreciation, the market has begun to shift. There are more properties for sale…things are taking longer to sell….and many neighbourhoods experienced price decreases between April and May (though prices were still up 17% over May 2016).
Which brings us to a critical question: Should you sell your Toronto house or condo now?
Who Should Sell Their Toronto Home Now?
- People who’ve already purchased a new home and need to sell. This one’s a no-brainer. If you need to sell your current home to finance the new one, you need to sell, and you need to sell fast. Make sure you talk to a mortgage broker to see if you have any backup options to refinance your current home, keep it and rent it out.
- People who are moving out of the city. You’re embarking on a new life and that life isn’t in Toronto. Sell! While keeping your house here and renting it out might be an option, do you really want to be a landlord? It’s a job and one that isn’t made easier by living outside the city.
- People whose life circumstances are changing – Maybe you’re getting divorced, having a baby or moving Dad to a nursing home. These are stressful life transitions that often necessitate a change in housing situation. Don’t get caught up in trying to time the market – life should always come first.
- Investors whose goals have changed. Maybe your tenants have given notice, and you don’t want to be a landlord anymore. Maybe the cash flow isn’t great. Maybe your property would sell for more money to an end-user and having it vacant will bring in a higher price. Maybe you have other plans for the money tied up in the property. Take a hard look at your goals and decide what’s right for you. [Related: Selling a Tenanted Home]
- People who are looking to cash out of the market at today’s prices. No matter what’s happening to the market right now, chances are you’ve made a killing by owning a Toronto property these past 10+ years. If you’re prepared to accept today’s market value (which yes, is lower than it was a few months ago), then selling is a way to lock in your equity. It also protects you from future price decreases if you think the market is on a prolonged decline – selling at the beginning of a downtown is more profitable than riding the market down. NOTE: If you decide to sell your primary home and choose to rent instead, be careful: if the market recovers quickly (which it often does), then you may have a hard time getting back into the market. We know plenty of people who tried this strategy a few years ago and continue to be renters because they can’t afford to get into the market anymore. Gambling with your primary home or retirement adds an extra layer of risk that isn’t for everyone.
- People who are looking to upgrade to a bigger home. Making a move up when prices are declining can be extremely profitable. While you might get 5% less selling your $900K house than you might have a few months ago, you’ll also save 5% on your new $1.4 M house…that’s a $25K bonus for you.
Pro Tip: The value of your house or condo only matters if and when you decide to sell it. It doesn’t matter what you, your neighbours or even your agent think your home is worth if it isn’t for sale. It’s not real money and that money isn’t yours unless you sell.
Who Shouldn’t Sell Right Now?
- People who are looking to ‘test the market’ and see how much their house is worth. I know you’re curious…what if someone would pay $1.5 million for this house I bought for $600K? But if you aren’t serious about selling, you’re adding to the already crowded marketplace and not helping your neighbours or yourself in the long-term.
- People who are trying to ‘cash out of the market’ if your expectations are cashing out at the prices from a few months ago. Sure, you can still lock in your equity by selling now, but you’ll be doing it at today’s prices – not the crazy high March prices.
- People who’ve recently purchased their home and don’t have a lot of equity. When you take into account the costs of buying and selling, it’s hard to break even if you haven’t owned the home for a long time. [Related: Selling the House You Bought Last Year]
Pro Tip: It’s almost impossible to time the market so STOP trying to do it.
Things to Consider When Deciding Whether to Sell Now or Wait:
- What are your goals? Be honest with yourself about what you want for your finances and your lifestyle.
- What kinds of risks are you prepared to take? Nobody has a crystal ball, and nobody really knows where the market is headed. How much risk are you comfortable taking?
- What’s your Plan B? If you can’t sell for the price you want, what’s your alternative plan? Can you refinance it to free up some equity? Rent it out?
- How long can you hold? If you believe we’re at the beginning of a more sustained market decline, you might be better off selling now, at the start of a decline, rather than later, when prices have gone down further.
- What’s your bottom line? How much do you really stand to make (or lose)? How much did you pay for your home? How much did you spend on closing costs and renovation your home? How much will it cost you to sell? If you bought your condo for $650K two years ago and can sell it for $850K today, you’ve made a lot of tax-free money – even if it’s not as much as you might have made a few months ago. [Related: Costs to Sell]
- How flexible are you? The market is changing day-by-day right now, and to sell successfully, you’ll need to be ready to adjust. You may need to adjust your price, your timeline, your expectations or your strategy.
- How patient are you? Houses aren’t selling in 6 days anymore, and it’s very likely that it will take 30 or 60 days to sell your home. That’s normal outside of Toronto and it may be our new normal. Fast forward 6 months and it’s possible that your house will sell faster…but it’s also possible that it will take longer. How patient are you?
No matter what you decide to do, make sure you have a solid professional at your side. We can help!