There are lots of reasons to sell your condo: upsize, downsize, rightsize, job transfer, change of scenery, the start of a relationship, end of a relationship – to name but a few. And if this is your first kick at the condo-selling can, you likely have A LOT of questions. You may even be totally freaked out just thinking about it. The good news is that we’ve compiled a list of Frequently Asked Questions to make a handy First-Time Sellers’ Guide to minimize your anxiety and stress. It’s designed to help you get organized and feel prepared before listing your condo for sale. Planning ahead for the sale process is crucial especially with the added stress of buying and selling at the same time.
Let’s consider the following steps to help you map out the selling process:
Step 1: Start a budget
Creating a ‘cost to sell budget’ will provide you financial reassurance along the way. Take the guessing out of it. Start by taking note of any defects or things you need to fix in your condo or invite someone over to give you some objective advice.
Let’s start by:
- Removing clutter or excess furniture because less furniture will make the room appear larger. You can either pay and place furniture into storage OR a condo stager can depersonalize your condo and make it feel more welcoming and neutral. The cost of staging your condo is sometimes paid for by your realtor. Don’t be afraid to ask if this is something they offer.
- Cleaning your condo before showings. Hiring a professional cleaning team will help you clean your condo for about a hundred bucks. The shinier your condo looks, the better it’s going to look to potential buyers!
- Upgrading your kitchen. If something needs to be fixed or replaced with stainless steel appliances, now’s the time to do so as a modern kitchen often makes the whole condo seem upgraded. Upgrading to new appliances will attract more buyers than you think.
- Painting the interior walls. You can accomplish this by hiring a professional OR you have the option to paint it yourself to save some coin. If you don’t paint like a pro hire one. It’s a good investment. A soft and light colour is recommended (we like light grey).
- Taking care of the bathroom. Replacing or fixing an outdated vanity, bathtub or toilet is never a bad idea.
Step 2: Finding the right realtor
We know finding the right realtor is tough! Hiring the RIGHT realtor is crucial and can determine the success of your sale process.
Here are some pointers:
- Do they have a good understanding of your neighbourhood, current market conditions, and the value of your property?
- Do they have excellent Google reviews? This is a powerful resource from a third-party’s perspective.
- Do they have a strong marketing plan to sell your condo?
- Do they have years of experience selling real estate within your neighbourhood?
- Do they seem trustworthy and reliable?
Step 3: Are you buying or selling first?
Now’s the time to ask yourself if you’re going to buy or sell first.
- If you decide to sell first, do you have a backup plan if you can’t find a place to buy? Where will you live and store your stuff?
- Will you qualify for bridge financing if the closing date of your existing condo is not the same as the possession date of your new condo?
- Do you have all your finances prepared?
- What’s the worst-case scenario in either scenario? Would you rather be homeless or carry two properties?
Step 4: Prep your paperwork
You need to prepare paperwork for your realtor before your condo is live on MLS. Accumulate necessary utility bills, tax bills, renovation receipts, improvements, any rental contracts, warranties, mortgage details, property survey, and disclosure of any past property issues. Refer to your realtor for detailed questions regarding your paperwork.
Step 5: Develop goals
Goal-setting is super important in selling your condo as it provides a guideline to keep you on track while preventing pitfalls.
Consider a few important questions to ask yourself:
- What’s the maximum price I can sell my property at market value? Ask your realtor to determine the market value of your property or obtain a property appraisal from a licensed appraiser.
- When do I need to get my condo sold? Setting a goal and a timeframe to sell your condo is a great way to meet deadlines. If you’re purchasing a new condo, try to have the closing date of your current condo prior to or on the possession date for your new condo. We suggest an overlap if bridge financing is an option. It reduces the stress of closing and moving all on the same day.
Step 6: Talk to your bank about mortgage penalties
If your mortgage has not been fully discharged, you may need to break your mortgage contract in order to sell. Talk to your bank if you have any mortgage penalties that need to be paid. Prepayment penalties are usually stated in your mortgage contract. The last thing you want is some unexpected penalty (sometimes in the thousands of $$$) at closing because you didn’t look into it.
If you happen to have a mortgage penalty. Consider the following options.
- Explore prepayment clauses. Some mortgages allow you to prepay your mortgages up to 20% and pay off the penalties on a reduced balance.
- Port your mortgage. If you’re buying a new condo at the same time when you’re selling, you can transfer your current mortgage to your new condo with existing rates and terms to avoid a prepayment penalty. You need to be approved by your lending institution.
- Can a Buyer Assume your existing mortgage? Depending on your contract, you may have the option to transfer your mortgage to a potential buyer. Ask your lender to ensure you are qualified.
Always consult your lender or bank for quality advice for prepayment options.
Step 7: Speak with your accountant for any tax implications on your property
Whether you’re selling your first investment property or your property that’s partially rented out, it’s always important to consider tax issues. When you sell your rental/investment property, any gain will be taxable UNLESS it’s your principal residence because of the principal residence exemption. The CRA will allow the principal residence exemption if you report the disposition and designation of your principal residence on your income tax return. Speak with your accountant or visit here for more info.
Step 8: Restrictions on tenanted condo
Selling a condo that’s tenanted is not always as straightforward as you would think. The Residential Tenancies Act sets out rights and obligations to tenants and landlords. Consider the following rules.
- The tenant(s) has the right to stay during a fixed-term lease unless otherwise agreed to by both parties.
- If the tenant(s) is on a month-to-month tenancy, the owner has the right to sell, provided the tenant is given 60 days notice after the owner has a firm offer in place. Vacant possession can only be obtained IF the buyer has indicated that they or an immediate family member will be occupying the unit.
- The law requires to give a tenant(s) 24hr notice before showings and it must be between 8am-8pm.
Step 9: Impact of potential showings
It may be a good idea to find an alternative place to stay temporarily during the showing period, especially if you have kids or pets. Leaving your condo during showings is usually a smart idea to avoid any awkward situations and it’ll allow the potential buyers to feel at ease. We highly recommend that you leave for showings!
If you’re purchasing a new condo after selling, here are some quick pointers!
Step 1: File your income taxes
Don’t forget to report your sold condo on Schedule 3, Capital gains when you file your income tax return. As long as you designate the property as your principal residence, you can avoid paying tax on your capital gain. Speak with your accountant about filing your income tax.
Step 2: Credit report
Having a good credit score is very important when it comes time to borrow. You need to have a good credit score in order to qualify for your next big asset. Here are some tips.
- Stay on top of payments.
- Keep your credit card balances low – your combined credit card balances should be 30% of your combined credit limits to maintain a good credit score.
- Manage your debt. Having too much debt such as a line of credit or a loan may impact your credit score.
Step 3: Be realistic
Create a budget for the price you’re willing to pay. Start by comparing similar properties and find out the market value of the condo you want to purchase.
Step 4: Get your mortgage pre-approved by a lender
Talk to your bank to negotiate a mortgage package with terms and interest rates that are satisfactory to you.
Step 5: Bridge financing
Consider qualifying for bridge financing if the closing date of your current condo and the possession date of your new condo aren’t the same. This type of financing is to bridge the gap in finances and to help you with the downpayment needed for your new condo.
We hope this article becomes your go-to guide when it comes time to sell your first condo. You can never be too prepared. When in doubt, hire a professional who can help guide you through the process. A good realtor can help to reduce stress while ensuring you get the best possible return on your investment.
If you’re curious about the market value of your condo or have any questions about selling, contact Michael Camber at [email protected] or 416-520-0779. Michael has been consistently ranked as one of the top-selling and most experienced Realtors specializing in the downtown condo market, with primary focus on the Liberty Village and King West neighbourhoods of Toronto.