This article by Randall Weese was featured in the Toronto Sun last year. We are reprinting it here with permission.
The decision to move is a big choice to make. You and your family have most likely thought long and hard about it. The reasons that drive such big changes are varied, and they’re unique to every family.
In my experience, there are two kinds of factors that influence people’s decision to relocate to a new home. I like to categorize them into two groups: the Known Factors and the Hidden Factors.
Known & Hidden Factors to Remember
While the Known Factors are the ones most of us think of when we’re gearing up for a move, the Hidden Factors are just as important—if not more so—and should not be forgotten. Let’s take a look at both.
When I say “Known” Factors, I mean the reasons we typically have for moving. These can be as varied as moving for a new job, wanting to live closer to or further from the city, upgrading for a growing family or downsizing for retirement.
These considerations can be the impetus for change, but then what I am calling the Hidden Factors kick-in. These are things that Canadians should keep in mind when planning their next move.
1. Mortgage Pre-Approval
Hidden Factor #1 when planning your move should be your mortgage pre-approval. Work out how long it will take to get pre-approved, and once it’s done, make sure you have the funds ready when you need them to close on your new home.
2. Timing is Everything
Hidden Factor #2 is timing. I mean in terms of average house prices and whether they’re going up or down. In 2013 alone, we’ve seen average GTA housing prices go from $482,648 in January to $538,881 in November, according to the Toronto Real Estate Board.
If you know you’re not planning to stay more than 5 years in your current home, you’ll want to keep a sharp eye on the market and carefully plan your timing when you decide to sell. If, however, you’re living in a house you plan to be in for the next 20 years, timing will be less of a consideration as historically, Canadian homes have appreciated in value in the long-term.
3. Prioritize Your Renovations
Hidden Factor #3 is actually one to keep in mind well in advance of your move. It’s about prioritizing renovations. Let me explain:
If you’ve recently moved into a home and you plan to be there for a while before reselling, you may be tempted to redo the kitchen or perhaps the bathroom. But are you renovating out of necessity? Or for a profit?
If you want to make some money on your resale, it makes sense to wait until a year or so before you move to do major renovations. They’ll be more up-to-date and in line with current tastes.
4. Don’t Forget Closing Costs
Finally, Hidden Factor #4 is closing costs. As a buyer in the GTA, you can count on the cost of the down payment, land transfer tax, legal fees, home inspection costs and taxes. On a $500,000 house (and remember, that’s not even the average price!) you’re looking at close to $34,000 in closing fees. That includes a down payment of 5%, which means you’d also have to pay an additional $13,000 in CMHC mortgage insurance fees.
As the seller of a house of that same value, you can count on close to $29,000 in taxes and commission fees. To minimize the impact these fees will have on your net worth, you can budget for them ahead of time. You can also find alternatives to a traditional commission by negotiating or choosing to sell with a flat-fee brokerage.
If you’re planning a move in 2014, keep these four Hidden Factors in mind. Take time to talk with your financial advisor in preparation for your sale and remember: Whether you’re upgrading or downsizing, the most important factor is that you love the home you’re in.