Real Estate Talk:
Consider resale when buying

Examine issues that may affect resale when investing in a home

By Joseph Marovitch

Updated February 14, 2024

I sold a duplex in Westmount to a buyer who stated they would only be leaving the house feet first. In other words, the buyer had no plans to move until death. Except, the buyer’s children had grandchildren, and the buyer decided to move to Vancouver, where the rest of the family was.

While owning the duplex, the buyer ripped out the recently installed beautiful kitchen to make it more of an office/kitchen. It was practical for the owner but for no one else. The buyer lost money when selling because the new buyer wanted the property and a nice kitchen.

When purchasing a property, consider how easy it will be to sell. In other words, consider resale value when purchasing.

One of my corporate clients had a five-year contract to work in Canada. The client was permitted to purchase a property while residing in Canada with the prospect of living in the house and selling at a gain when it was time to leave. Immediately upon possession, the buyer painted the walls in the colours of the client’s country of origin. The colours were bright, a mix of reds, pinks, and yellows.

Two months after taking possession of the house, the company informed the client that he was to be relocated to another international location. My client immediately called me and asked, with urgency, to sell the house we had just purchased. I suggested painting the house in a neutral colour. The client refused. During the time I was selling the property, the client had already been relocated and was paying the carrying cost on a property he no longer lived in.

Eventually, within six months of listing the property, a price was accepted that was lower than the purchase price, and a penalty had to be paid on cancelling the mortgage before expiry. When purchasing a property, consider how easy it will be to sell. In other words, consider resale value when purchasing.

‘When searching for a home, in considering resale, price and location play a large factor.’

Some people purchase a property with the idea they are never going to leave that property. We are all part of the circle of life. We have no choice. We are born into our parent’s home. We move to our first apartment. We marry and buy our first house or condo. We have children and need a larger home. The kids move out and we need a smaller home. We get old and require assisted living, therefore, perhaps move to a retirement home. Other reasons to move are financial or work-related. People move and consequently, resale must always be considered.

When searching for a home, in considering resale, price and location play a large factor. Is the price fair, and is the location good? Will I get my money back when I sell and will the property be easy or difficult to sell? This is the beginning of the process.

Now you have purchased the home and you want to decorate. You like the colour pink, but does everyone else like pink when it is time to sell? You want more living room, therefore you decide to make the house larger and, in doing so, sacrifice space in the backyard. When it is time to sell, does everyone else like a small backyard?

It is important to get the best price when buying but it is also important to choose the best location possible within your budget. A property should be as easy as possible to sell when the time comes. If you get a great price for a property next to a highway or by train tracks, it may take a very long time to sell and you could even lose money.

‘Buyers are attracted by spacious rooms, nice bathrooms and up-to-date well-designed kitchens.’

Neutral colours in a home, such as off-white, creams and other light colours, are better for resale. Buyers are attracted by spacious rooms, nice bathrooms and up-to-date well-designed kitchens.

Some issues that affect resale negatively are:

• Price too high, house in poor condition, dilapidated appearance.
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• Location near a highway, train track or too close to a school, causing noise and traffic inconveniences.
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• Dated bathrooms, old-fashioned kitchens, small bedrooms, tandem garages or no garage; pools can be a non-starter for families with young children.

These are just a few issues that can generally negatively affect resale. It is better to realize these issues at the beginning than to find out at the end when selling.

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State of the market

Bank of Canada interest rate: 5 %
Canadian prime rate: 7.2%
Canada inflation today: 3.4 %

We are no further along than last week. Inventory and buyers are short as both buyers and sellers wait for the Bank of Canada to decide which direction interest rates are going. That direction of rates depends on the inflation rate, which is not controlled so much by interest rates as by world events.

I have been asked several times if now is a good time to sell, or should the seller wait. This is my answer: We can only know for certain what is occurring in the present. The future is uncertain, especially now. Therefore, a seller can sell now with the certainty of knowing what they will receive or sell later with risk.

‘… one can either sell now with certainty or sell later with risk. One must weigh the pros and cons and determine how much risk they can afford.’

If the world stabilizes, supply chains speed up, and inflation and prices decrease, then property values will increase for sellers and the buyers will have lower borrowing costs.

Should everything remain the same or get worse, then property value will decrease for sellers, interest rates will rise and buyer borrowing costs will rise.

Therefore, one can either sell now with certainty or sell later with risk. One must weigh the pros and cons and determine how much risk they can afford.

Have a great week!

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