It is a question that many homeowners will ask at some point in their lifetime – should we sell or renovate? While sometimes this answer can be an easy one,(you don’t like your neighborhood or are looking to shorten your commute by moving closer to work), other times the answer is not so easy. Do you love your neighborhood or have the best neighbors on the block and the thought of leaving your current home has you feeling torn? Then this article is for you.
We had a chance to sit down with Vice President of Tango Financial, Sandy Fisher, to discuss some of the elements you may want to consider before making this decision.
CAN YOU GET EVERYTHING YOU WANT IF YOU INCORPORATE YOUR RENOVATION INVESTMENT INTO A NEW HOME?
Sometimes that dream home just lands in your lap and you truly don’t need to change a thing in order to make it yours. However, more often than not, a new home won’t necessarily hit EVERY box on your wish list and it may not function exactly how you would like it to for your family. Even if you do find the house of your dreams, there may still be decorating work and some minor tweaks that need to be made. These costs can add up and suddenly, the house you thought was turn key, has a list of to-do’s needed in order to have it represent “You In Every Detail”
CASE STUDY: JULIE AND JAMES
Julie and James are considering a major renovation of their home in West Edmonton that has been valued at approximately $1,000,000. They have set aside $300,000 to renovate their home, but are wondering if it would make more sense to simply sell the home and put that money into the next property so they could purchase a home for up to $1.3 million. If Julie and James decide to sell, they will need to incorporate the out of pocket expenses to sell and purchase to determine how much money they would have leftover to put towards the next house.
On a $1 million home sale, they would likely be paying real estate fees upwards of $70,000 (7% of the purchase price). This is usually the largest portion of the money that gets eaten up in a sale transaction. In addition to this amount, Julie and James need to update the home in order to get top dollar. This may include a new paint job, trips to the eco or waste station, landscaping updates, storage fees of extra furniture/boxes, and staging services. In addition to these extra costs, there are also closing costs, lawyer fees, moving expenses, inspection fees, and fees to break or port your mortgage.
“Costs that one could encounter when purchasing a new home include legal costs, whether selling and buying or just buying, potential payout penalties depending on the circumstance, landscaping, and decorating. There would also be the cost of hookups, and bridge financing if you are selling one home and purchasing another depending on the dates,” Sandy notes. “If you are buying a brand new home, you would have unforeseen upgrades, landscaping, fencing, deck build if required, and an individual’s time to make all the decisions that are required in building a new home.”
All of these costs, plus the real estate fees could easily add up to $125,000 – which means that is $125,000 less that they can put towards the new house. Now instead of purchasing a $1.3 Million dollar home, they are reduced to a $1.175 million dollar home.
When Julie and James start looking for their next home with their new budget, they realize that even if they purchase a home at this price point, it won’t be customized to their specific needs and it may not function for their family without some updates. Many of the homes they see do not match their personal style and they agree that moving up to this price point will also require purchasing more furniture to fill the extra space.
While moving and starting fresh may seem to be the simpler option of the two, the truth is that both renovating and moving/selling can be stressful times of your life. If you are selling your home, you lack control over the timing and sale price. You are required to keep the home looking “show home ready”, sometimes for months on end, in anticipation of last minute showings.
If you are renovating, you can experience decision fatigue and can feel overwhelmed if you decide to live in the home while you renovate (this is one of the reasons we recommend moving out of your home during major renovations, when possible). The good news with renovations is that you have much more control over the timeline and budget – especially when you are working with qualified professionals.
Even if James and Julie decided to finance the renovations, they would still have more money in their pockets than if they had to spend the costs associated with moving and purchasing a new home. The renovations would also provide an increased value in the home they currently live in.
“There are terrific options for people that may want to renovate their current home, in the form of a Home Equity Line of Credit, Refinance plus improvements or if there is enough equity you can do a straight refinance. With all of these options, you cannot exceed an 80% loan to the value of your home. Your mortgage professional could explain all of these options to you,” Sandy says
THE PERFECT TRIO
The Perfect Location + The Perfect Home + On Budget = The Perfect Trio
How often do we see this powerful trio come together? Not as often as we’d like, that’s for sure. You will likely need to concede on one of these areas in a home purchase and because budget and location are harder to change, the house style/functionality/layout/finishes is usually the piece of the puzzle that gets missed. This means that even if you go through all the hoops of moving and purchasing, you may still be stuck with a house that doesn’t give you everything you want without renovating.
SO HOW DO I GET EVERYTHING I WANT?
Our slogan here at AMR Design is “You In Every Detail”, as this is what we aim to produce for our clients. We want our clients’ homes to be a representation of who they are, what they have achieved in life, and where they want to take their lives in the future. Whether you stay in your current home or decide to move, a renovation can help you create a customized solution to your home needs – no home will ever be perfect without putting the work into it.
If you are considering purchasing a home, we recommend you contact a designer to see if it is possible that the home is renovated to suit your needs. Alternatively, an information-filled Consultation with Brenda would provide you with a great base of expert advice for a more informed decision on your next house purchase. AMR Design is available for consultations to attend showings with you to determine if the home you are looking at can be customized to meet your needs.
Sandy left us with this to say regarding the big decisions “In my opinion, it is a personal decision and one must weigh out the pros and cons for themselves. I think if the homeowner has enough equity or other source of funds for the project and loves their neighbourhood and house size then why not stay and renovate! There is something to be said about living in a great neighbourhood, having great neighbours, and being close to the amenities that you love, those are signs that a renovation project is worth it. Owning real estate and building equity in my opinion is always a safe bet. You have to live somewhere and it might as well be your own!“
Special thanks to Sandy Fisher at Tango Financial for providing us with her expert insight as a mortgage professional.