Selling - RankMyAgent - Trusted resource about Buying, Selling and Renting https://rankmyagent.com/realestate RankMyAgent.com is the most-trusted source that brings home buyers, sellers and renters and investors a simplified approach to real estate information Wed, 19 Apr 2023 22:26:15 +0000 en-US hourly 1 https://wordpress.org/?v=6.4.1 https://rankmyagent.com/realestate/wp-content/uploads/2018/02/cropped-rma100x100-32x32.png Selling - RankMyAgent - Trusted resource about Buying, Selling and Renting https://rankmyagent.com/realestate 32 32 Renovating your Return on Investment for the Best Results https://rankmyagent.com/realestate/renovating-your-return-on-investment-for-the-best-results/ Thu, 20 Apr 2023 13:00:00 +0000 https://rankmyagent.com/realestate/?p=2001 Home renovations that can increase the return on investment and up the value of your home for sale. The spring market in Canada is starting to heat up with record low inventory. Buyers have started to come back, as for the first time in the last few months Bank of Canada has not increased interest […]

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Home renovations that can increase the return on investment and up the value of your home for sale.

The spring market in Canada is starting to heat up with record low inventory. Buyers have started to come back, as for the first time in the last few months Bank of Canada has not increased interest rates.

In fact, Royal Lepage has adjusted their national aggregate home price forecast to increase 4.5% year-over-year in Q4 2023. This is an opportune time for home sellers waiting in the sidelines, to finally start getting their home ready for sale and look into renovations.

When selling the place you’ve called home for the past five, 10 or 30 years there is always one question that comes to mind: How do I get the most money back on my home?

How can homeowners increase the ROI, or return on their investment? There are a ton of tricks and tips to increase the ROI when selling a home, but the number one piece of advice is to look into hiring a Real Estate Agent.

The right Real Estate professional can assist in setting an appropriate asking price which is influenced by the season, annual trends, neighbourhood and amenities offered in the area. They can also help with other things like organizing showings, and offering invaluable advice about possible projects that can be completed to upgrade your home and also increase sale price.

Other ways to ensure you are increasing your investment in your home upon selling is by putting some money back into the house before the sale sign is even hung.

Who is buying?

Speaking with your hired professional and by taking note of the demographics in the area can help you determine your target audience. Who will be looking at purchasing your home? A young family? An expanding family? A couple looking to retire? Investors? Perhaps it is some people who are looking to flip the property?

Learning your target demographic can ultimately save you from investing money into big projects that will do nothing to return on your investment. “There are a lot of buyers who just want to buy a home that is turn-key. Updating rooms like the kitchen, will have the greatest impact for them. However, you need to know who your buyer is so the upgrades will align with their wants and needs.” says Terry Osti, award-winning, REALTOR® at StilHavn.

Web appeal is the new curb appeal

Forbes reports that it is just as important, or more so, to have a strong web presence when selling your home as it will bring interested buyers to the door. Senior director of PR at Realtor.com, Julie Renyolds told Forbes that ads featuring walk-through tours are clicked on 150% more than ads without them.

Curb appeal still a good investment

HGTV says that curb appeal is still just as important as ever. After all, you can only make a first impression once.

Ensuring cracks in sidewalks and driveways are patched, windows and doors are caulked and door knobs, locks and hardware are upgraded are low cost ways to boost the return on investment upon selling.

Taking that extra initiative and planting flowers and perennials in the garden can also have a lasting impression and increase the value of the home. Interior designer Brittany Farinas of House of One told Forbes.com that adding some greenery can give the outdoors a whole new look.

New siding, although a little more costly, is reported to rank high on the cost vs. value report according to HGTV. According to Forbes.com, homeowners can expect to pay between $1,000 to $16,000, depending on the size of the home and the type of siding material used, but it will not go unnoticed.

Sound structure is key

Interested buyers aren’t going to be as thrilled about an upgraded kitchen if the basement is flooding due to poor plumbing or cracks in the foundation.

HGTV says that investing that facelift money into ensuring the roof is in good repair, the foundation is sturdy, the furnace is functioning properly and all electric and plumbing is up to code will ensure the asking price won’t plummet in order to compensate for the necessary repairs.

Replacing windows can cost around $15,000 for a 2,000-sq-ft home with new vinyl windows, but RE/MAX predicts a return on investment of 75%.

Focus cash on bathrooms & kitchen

The kitchen and bathrooms are where a lot of time is spent in the home and architect Steve Straughan based out of Los Angeles’ KAA Design Group says they are the areas of the home that interested buyers can tell if money has been well spent.

According to RE/MAX, kitchen renovations such as countertops are one of the top three changes that lead to a high return on investment. Countertops can be expensive, but $3,000 stones such as granite or quartz can make a huge difference. To further elevate your kitchen, spend around $5-10,000 for stainless steel kitchen appliances. Kitchen renovations typically have a return on investment of 75-100%, usually the highest ROI.

Bathrooms can often always use a facelift — and, for certain, a deep clean. Every bathroom is different, but it is one of the main focuses that buyers look for in a home. Renovations can vary, but having a vanity with marble countertops or a frameless glass shower are elements that can draw buyers. A tip recommended by RE/MAX is to analyze your bathroom and figure out the strengths and weaknesses of it. A typical bathroom renovation is between $5-$15,000 and can have a return of 62%.

Updates and remodels should focus on creating open and inviting spaces and one of HGTV’s tips is to skip that soaker tub and put in a grandiose walk-in shower — or steam shower. After all, who really has the time anymore to take lengthy soaks often enough to justify the space the tub takes up.

Creating additional space

Does the home have an attic with dimensions that would allow the creation of an additional bedroom or office space? Can you extend the deck or create an outdoor living area or sunroom? Can the basement be finished and transformed into a cozy living space? Adding more functional spaces in your home can make it look larger and eliminate any unused spaces. Forbes predicts that the average cost to finish your basement is $22,850 in 2023.

HGTV says keep other homes for sale in the area and your target audience in mind because you don’t want to renovate your home to the extent that you price yourself out of your market.

Go Green

Concentrating on making the home energy efficient with better insulation, window and door replacements can not only increase your ROI when you sell the home, but you will also notice instant savings on your energy bills. By making such upgrades, AIC says the ROI is typically between 50-75%.

Plus, as of December 1, 2020, Canada has offered a number of grants for homeowners to make energy-saving upgrades.

At the end of the day, it isn’t always the fun and sexy renovations that add the most value to the home. Sometimes it’s the dirty work that goes the extra mile when selling. But, to make sure you are getting the best return on your investment, be sure to speak with a professional Real Estate Agent who can help answer any questions you may have along the way.

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How to live small with a big family in 2023 https://rankmyagent.com/realestate/how-to-live-small-with-a-big-family/ https://rankmyagent.com/realestate/how-to-live-small-with-a-big-family/#respond Thu, 16 Feb 2023 11:21:00 +0000 https://rankmyagent.com/realestate/?p=1073 Family day is around the corner in most parts of Canada – allowing us to take some time to slow down and spend some solid Q-time with our family and our loved ones. After more than two years living in a pandemic world, we all got used to spending more time at home, many times […]

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Family day is around the corner in most parts of Canada – allowing us to take some time to slow down and spend some solid Q-time with our family and our loved ones.

After more than two years living in a pandemic world, we all got used to spending more time at home, many times surrounded by our family, so how can we make this day special? Especially when sharing tight living quarters.

There are, of course, financial and ecological perks to shrinking the square footage of your home, but what do you do when you can’t shrink the number of occupants?

Juggling multiple schedules, maintaining well-treaded, multi-use spaces, and organizing become top-tier tasks for families. Having well-delimited areas became essential during the pandemic. A home office to work quietly and an entertainment room where you can have fun with your family can make spending so much time together easier. So that is why we prepared a few tips to complete this daunting task quickly and without additional stress.

Everything has a home. This tried-and-true tip has been mentioned time and time again, but it is especially important in a smaller space. Make sure that every item in your home serves its purpose and has a place to live where it can be tucked away when it’s not in use. Channel your inner HGTV guru and hit up Home Depot, Home Sense, Ikea or Home Outfitters and find some cute — and practical — storage units that will work in your space, and don’t be afraid to make labels!

The hardest part about this tip — and I think we all know it well — is to actually follow through and put things away when we’re done using them. When living in a small space, especially with other people, things hanging out on surfaces will instantly make your home look more cramped and more cluttered. Tucking them away into their respective drawers or cupboards after use will have the place looking more put-together and reduce some of those stress levels, making clean ups more efficient.

When eyeing up your space, it’s important to ask yourself if all of the items in your home serve a purpose and if not, ditch the clutter and consider downsizing. Listen to Marie Kondo and her art of Tidying Up. If the item does not bring you joy or serve any real purpose in your space, it may be time to part ways with it. 

Use space wisely. Families living in smaller spaces may have to break away from the intended design of the space and get a bit creative. What I mean is who says that the master suite has to be for the adults? Why not put the kids in there? They can share the space, plus it can double as a playroom and keep their toys from spilling out into the rest of the living space.

You can also think of how you can use curtains and bookshelves as room dividers to better create designated spaces to serve specific purposes. Don’t have a closet, for instance? Use a cube shelf from Ikea as a divider and use a few free-standing rolling racks behind to create a makeshift wardrobe. Those cube shelves work wonderfully because you can store items on both sides.

One way to create the illusion of more space is to paint your walls white. Not only is this currently in fashion but it allows the light to add extra square footage to your space, well at least make it look like that. Colour has a tendency to overwhelm a space, so when creating your decor palette, stick to about four colours that can be used throughout the home with one contrasting “pop” colour. The nice thing about colouring your home with decor is that it can easily be replaced when you want to redesign or create a new atmosphere.

Do your kids love to make crafts? Real Simple offers this tip and I couldn’t help myself but include it in this list: throw out the glitter. Glitter is notorious for being the most impossible crafting supply to be cleaned up. Now, imagine what happens when you let this abomination loose in a small space? You’ve seen those glitter bombs? But picture it in your home, where your clothes live and your food! Glitter NEVER really goes away. It hides — lurks in the shadows, in the corners of your cupboard, only resurfacing its sparkly face in the most inopportune moments.

This tip ties in with Real Simple’s point of ditching the sentimental mentality. When living in a small space, you will really have to make some decisions on which meaningful items you keep and which you part with.

For instance, not every single piece of your child’s art collection can earn its spot on the fridge simultaneously. But, what you could do is bring in the tech. Take a digital photograph of your children’s masterpieces and put them on a rotating digital picture frame. That way you don’t have to keep all of the hard copies, but rather select a few of their favourites to store for when they’re older. Plus, they’ll have a digital copy of everything they’ve done on a USB fob when they turn 18 and move out!

Getting outside is one of the best ways to “add more space” to a small home. And now seems to be a good time to get out there as COVID-19 restrictions are being eased up in many provinces. Take advantage of the neighbourhood around you and enjoy quality time with your family as you take a nightly stroll, plan a tobogganing day with hot chocolate or a quick play at the park. Don’t forget to keep yourself and your loved ones safe!

Living in a small space with lots of people and children can be loud, busy and crowded, but by escaping into the wilderness, or even into our own communities, we can take more of that personal time and space while still enjoying the company of our loved ones.

Parents raising their children in smaller residences are becoming a more common occurrence as the housing market is still hard to break into in Canada’s big cities like Toronto, Vancouver and Montreal and Calgary. But with some creativity, planning, organization and absolutely no glitter, you and yours can make it work.

From everyone at RMA, we hope you have a fantastic and fun Family Day with your loved ones.

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FSBO: Everything You need to Know https://rankmyagent.com/realestate/fsbo-everything-you-need-to-know/ Thu, 09 Feb 2023 10:30:00 +0000 https://rankmyagent.com/realestate/?p=1818 The last ten years have seen a sharp rise in the number of homeowners choosing to sell their property as part of the FSBO (For Sale By Owner) movement rather than listing with a traditional REALTOR® and/or real estate company to sell your home. Enticed by the premise of pocketing more money from the sale […]

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The last ten years have seen a sharp rise in the number of homeowners choosing to sell their property as part of the FSBO (For Sale By Owner) movement rather than listing with a traditional REALTOR® and/or real estate company to sell your home. Enticed by the premise of pocketing more money from the sale of their home rather than paying out commission to a REALTOR®, many homeowners find they’ve bitten off more than they can chew when it comes to selling their property.

Why is that?

Simply put, selling a home takes a lot of time and effort. Although FSBO is not an impossible path by any means, there are a number of key points to keep in mind before choosing to oversee the sale of your home.

Not only are you responsible for all aspects of putting your home on the market, including, but not limited to, setting the listing price, advertising the property and setting up as well as being in attendance for showings for potential buyers, you’ll also have to negotiate in terms of the sale, including price, closing date and more. In other words, instead of having multiple specialists to help you with the sale of your home, you will be the all-rounded expert in all fields.

For many home sellers, these tasks are worth their time and effort in lieu of paying out commission to a REALTOR®.

But to backtrack just for a moment, let’s look at setting the listing price a little more closely:

One of the biggest risks associated with selling your home on your own is not hitting the “sweet spot” of home prices. Market changes can cause housing prices to fluctuate. If your house is overpriced, you might find it sitting on the market for longer than what you might have expected. Additionally, prospective buyers may shy away from a home that has been sitting on the market for an extended period of time because they might think negatively about the house or the neighbourhood.

On the other side of the coin, selling the house for too little benefits no one except the buyer. If trying to avoid paying commission is the primary motivation behind selling your home on your own, but you undervalue the price of the property, the cost-savings benefit of FSBO might not be fully realized.

This is one of many areas that working with a REALTOR® can come in handy. Real Estate professionals have access to data on actual selling prices  – not listing prices – and would be familiar with relevant market demands and changes in your neighbourhood helping to provide analysis of current trends.

Some Risks when you decide to sell on your own:

  • Leaving money on the table as FSBO don’t get as much exposure without the help of a REALTOR who is well connected to buyer agents
  • Will have to pay for legal, marketing costs yourself
  • Risk that home defects have not been documented, running into legal issues down the line
  • Time spent trying to list, market and negotiate your own transaction
  • Safety concerns when showing your own home
  • Wasting time and efforts by staging and showing your home to potentially unqualified buyers
  • First time home buyers may be apprehensive to seal a deal without the help of a professional

Statistics show that selling your home with the assistance of a professional REALTOR® will garner you a bigger profit. According to the National Association of REALTOR®’s 2022 Profile of Home Buyers and Sellers, the average FSBO home price was $225,000, while the average home price sold by an agent was $330,000.

That report also showed that only 10% of home sales in the U.S. were FSBO. It also stated that 86% of buyers purchased their home through a real estate agent or broker, a share that has steadily increased from 69% in 2001.

Only 28% of FSBO home sellers decided to market their homes on websites including social networking websites and FSBO websites. However, it is evidently a useful platform to use because 51% of buyers found their home on the Internet. Other FSBO sellers marketed their homes through friends, relatives, or neighbours (28%) or yard signs (20%).

The most difficult tasks for FSBO sellers cited in the report include getting the right price (16%), understanding and performing paperwork (13%), selling within the planned length of time (10%), preparing home for sale (6%) and having enough time to dedicate to all aspects of the sale (1%).

Although you may think there is no one better qualified to show off your house than yourself, a REALTOR® can ensure the presentation of your home goes as smoothly as possible.

Not only can a REALTOR® offer expert tips on staging your home to look its best, they are also able to highlight certain features or aspects of the home that the homeowner may unintentionally overlook during the presentation process. REALTOR®s also know the current trends as to which designs or furniture arrangement can attract buyers. For those pressed for time and find themselves juggling a career and family, working with a REALTOR® can be a wise investment.

The ultimate goal in any home sale process is to get as many eyes on, and as many people passing through, the property as possible. A REALTOR® can not only have your property listed on the Multiple Listing Service (MLS), they can help promote the property via flyers, pamphlets and postcards with eye-catching photos and major selling points to help drum up interest.

These are costs that FSBO sellers would otherwise be responsible for absorbing.

Another benefit of using a REALTOR® is the exposure they can provide to other agents who might have the perfect buyer for the property already in mind. An agent tour of the home early in the sales process allows other agents to ask questions and gather information about the property that cannot be discovered through pictures and MLS information alone.

Most importantly, a REALTOR® is there to represent your best interests as a seller.

Your REALTOR® can help you objectively evaluate each offer without compromising your marketing position. With a REALTOR® in your corner, they serve as a bit of a buffer between you and the seller. REALTOR®s can solicit honest and open feedback from prospective buyers, who may not be as candid when dealing with a homeowner on a one-on-one basis.

And when you’re lucky enough to reach the offer stage, they will not only help you devise a win-win agreement that will appease both parties, they can also help walk you through the process of appraisals, inspections and financing – tasks that you may not be as familiar with as a FSBO.

Keep in mind that several different variables can arise between the sales agreement and the final closing of the property, as both buyers and sellers have various legal responsibilities that need to be fulfilled.

REALTOR®s carry Errors & Omissions insurance, which serves to protect parties from potentially financially-crippling liability should they be brought to court for negligence, errors, failure to disclose, or other possible reasons.

Your home is among the most valuable assets you’ll ever own. When it comes to selling your home, trust a professional REALTOR® to ensure you get the job done right without undervaluing your home.

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The Full Guide to the Vacant Home Tax in Ontario and Lessons to be Learned from BC https://rankmyagent.com/realestate/the-full-guide-to-the-vacant-home-tax-in-ontario-and-lessons-to-be-learned-from-bc/ Tue, 31 Jan 2023 03:37:54 +0000 https://rankmyagent.com/realestate/?p=1547 “Vacant home tax” has been a buzzword for politicians, Canada’s real estate community and the population at large for a few years now. The re-elected Liberal party, led by Justin Trudeau, has implemented a tax on foreign-owned vacant properties that they passed in their budget before the September 2021 election. Toronto is one of the […]

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“Vacant home tax” has been a buzzword for politicians, Canada’s real estate community and the population at large for a few years now. The re-elected Liberal party, led by Justin Trudeau, has implemented a tax on foreign-owned vacant properties that they passed in their budget before the September 2021 election. Toronto is one of the first cities in Canada to implement a vacant home tax as all residential property owners have received a notice stating “all residential property owners are required to declare the occupancy status of their residential property(s) annually.” Any owner that does not reply prior to February 2, 2023 will receive a fine. More jurisdictions seem to be following Toronto’s footsteps, as Hamilton is set to implement one beginning in 2024, and Peel is conducting public consultations to determine next steps of the implementation.

Places like British Columbia have had vacant real estate taxes for a few years now. Will the vacant home tax achieve its goal of reducing real estate prices? Where has the tax been sued before, and what were its results? This article will analyze the various proposals for vacant home taxes and look at places like BC, which have instituted such a tax to see how effective they can be.

Friendly reminder: Please speak to an accountant or tax professional when dealing with any potential taxes (be it on your property or personal income). This article provides information about taxes – not tax advice.

How do the proposed Vacant Home Taxes Differ?

Income taxes are prevalent worldwide at Federal, Provincial and State levels. Of course, the specific income tax in different regions varies in what percentage of income is taxed, and vacant home taxes can vary in the same way. On top of what percentage is taxed off the value of an empty home, how that tax is enforced can differ in numerous ways.

Peel’s proposed vacant home tax responds to an estimated 13 000 vacant units across the region. The tax, developed with the help of Ernst and Yonge, has the goal of encouraging owners to either sell vacant houses or rent them. Owners would have to report if a property is vacant, and if vacant, the municipalities of Peele would collect the vacant tax with property taxes. A 1% tax would net about $16.4 million a year, with the cost of administering the tax being $5 million annually.

The region of Peel is currently still in the process of collecting public consultations about their inputs on the level of public support, public policy implications, potential effectiveness of the tax in terms of increasing the supply of affordable housing, its impact on affordability, and privacy-related concerns. The results of the consultations will help them determine next steps and program design options of the implementation.

The Toronto vacant home tax follows a similar structure to the proposed one of Peele. The onus is on property owners to declare if a home is vacant each year, and the city will investigate possible homes suspected to be vacant. While the proposed Peele Region tax is still being developed, the Toronto vacant home tax seems to have more devices to tackle homeowners with vacant homes that have not declared their residences as such. On top of being subject to the tax, the city may subject non-declaring owners to various penalties and fines. Toronto’s tax is set at 1% and is predicted to raise $55 to $66 million for the city.

Overall, the much-discussed vacant home taxes in Ontario follow a similar structure of self-declaration and enforcement through auditing. The difference in Ontario’s jurisdictions is how much the tax is (with Peel considering a tax of 1-3%) and, as shown through Toronto, how they plan to reprimand homeowners who do not declare their vacant homes.

What is the Toronto Vacant Home Tax Declaration in Toronto?

Property owners in Toronto must annually now declare the occupancy status of the properties they own, even if they are currently living in the property.

This declaration  will determine if the Vacant Home Tax will apply and needs to be paid.

The Vacant Home Tax is 1% of the Current Value Assessment (CVA) and applies to Toronto homes declared, deemed, or found vacant for over 6 months in the previous year. The tax is based on the property’s occupancy status in the previous year.

To declare, you’ll need your 21-digit assessment roll number and customer number from your property tax bill or statement. Declarations can be made through the City’s online portal or via a paper form. Incomplete paper forms will not be accepted. Owners of unoccupied properties may be subject to an audit.

Corrections to declarations can be made before the February 2 deadline or by filing a Notice of Complaint after the deadline. Failure to declare or making a false declaration may result in a fine of $250 to $10,000.

Some Exemptions exist where a property can be left vacant and the tax does not need to be paid:

Eligible ExemptionDescriptionSupporting Documentation 
Death of a registered ownerThe property was vacant for six months or more in the previous year due to the death of an owner.Copy of death certificate.
Repairs or renovationsThe vacant property is undergoing repairs or renovations, and all the following conditions have been met: a) occupation and normal use of the vacant property is prevented by the repairs and renovations;
b) all necessary permits have been issued for the repairs and renovations;
c) the City’s Chief Building Official is of the opinion that the repairs or renovations are being actively carried out without unnecessary delay.
Description of the type of project preventing occupancy. Copy of building permits issued related to the repairs and renovations.
Principal resident is in careThe principal resident of the vacant property is in a hospital, long term or supportive care facility for at least six months during the taxation year. This exemption may be claimed for up to two consecutive taxation years.Signed letter from health care facility on letterhead.
Transfer of legal ownershipYou purchased your property with a closing in the taxation year being declared, and the sale involved a 100 per cent transfer of an interest in the property to an unrelated individual or corporation. This excludes name changes, adding a second owner and removing a second owner.Copy of land transfer deed.
Occupancy for full-time employmentThe vacant property is required for occupation for employment purposes for a total of at least six months in the taxation year, by its owner who has a principal residence outside of the Greater Toronto Area.Proof of residency outside of Greater Toronto Area. Signed letter from employer on company letterhead or employment contract.
Court orderThere is a court order in force which prohibits occupancy of the vacant property for at least six months of the taxation year.Copy of court order.

Source: https://www.toronto.ca/services-payments/property-taxes-utilities/vacant-home-tax/

What was the effect of British Columbia’s vacant home tax?

BC’s vacant home tax (the “Speculation and vacancy tax”) turned three years old at the end of 2020. Like the goals of the proposed vacant home taxes in Ontario, BC implemented the tax to increase the affordability of real estate. Owners must declare if their home is vacant, and if vacant, the relevant tax rates apply.

The BC model differs from many of the proposed models in Ontario because the rate depends on one’s citizenship. After 2019, the tax rate stayed at 0.5% from its 2018 level for Canadian citizens and permanent residents who are not part of a satellite family. However, if you are a foreign homeowner or a satellite family, your tax rate will be 2% off the value of your home.

Vancouver’s empty home tax has a similar structure of administration (declaring, audits, etc.) but increased to a tax rate of 5% in 2023 compared to 3% in 2021-2022. However, Vancouver and BC’s taxes are, of course, different – theoretically, someone could be exempt for both or have to pay both when the taxman comes knocking. Hence, a Canadian citizen may have to pay Vancouver’s 5% tax and BC’s 0.5% tax for their empty home. If Ontario were to implement a vacant home tax on a provincial level, it would likely interact with the taxes of its municipalities like Toronto similarly.

In terms of effect, both taxes use their revenue to invest in housing initiatives, on top of their intended effect to deter empty houses. For the fiscal year 2020, BC raised $81 million for affordable housing programs. However, Vancouver and BC at large still remain seller’s markets – BC housing prices are still unaffordable for many people. So, evaluating the effectiveness of the taxes becomes a bit of a chicken or the egg situation – is the tax ineffective? Or would prices have increased even more without their implementation? One of the tax goals, to stop houses from being vacant, seems to be effective, with rental units increasing in metro Vancouver.

The city of Toronto is estimating the tax will bring 66 million in revenue per year, which will be used to create affordable housing.

A vacant home tax may be necessary for a stable and affordable housing market, but by no means is sufficient. A generous reading of the tax is that it is a certified revenue earner and helps increase rental vacancy but is insufficient to cool rising real estate prices. At its worst, it seems that the vacant home tax has no meaningful effect on the housing market but remains an effective revenue earner. Taxes will likely have to be used with supply increases and zoning reform to adjust the market properly. As the tax is implemented in Ontario in 2023 , the public should know that they are not a panacea but one tool in a toolbox to make real estate affordable.

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How to Navigate a Recession as a Canadian Home Seller https://rankmyagent.com/realestate/how-to-navigate-a-recession-as-a-canadian-home-seller/ Tue, 25 Oct 2022 21:20:26 +0000 https://rankmyagent.com/realestate/?p=1677 “Recession” is a scary word. We associate it with unemployment, a declining stock market, and other negative scenarios. An economic downturn could stress you out if you’re selling your home. A contracting and uncertain economy doesn’t usually yield top dollar for home sales. At RankMyAgent, we aim to make the home selling process more manageable. […]

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“Recession” is a scary word. We associate it with unemployment, a declining stock market, and other negative scenarios.

An economic downturn could stress you out if you’re selling your home. A contracting and uncertain economy doesn’t usually yield top dollar for home sales.

At RankMyAgent, we aim to make the home selling process more manageable. So this article explains what a recession entails and tips to sell your home for the best price during a recessionary environment.

What is a Recession?

The traditional definition of a recession refers to two consecutive quarters (three-month periods — so two consecutive quarters equal six consecutive months) of declining Gross Domestic Product (GDP). But this definition comes with numerous asterisks.

Even if Canada faces two declining quarters, we may not be in a recession. We continue to face record-low unemployment rates, and in a recession, unemployment peaks.

A recession depends on numerous factors like employment, consumer spending, and GDP. An “official” recession usually occurs once a group of leading economists looks at these factors and determines we’re in a recession.

What Can We Expect During a Recession?

A recession’s outcomes and contributing factors are a “Catch-22” — i.e., the presence of the factors indicates a recession, but the same circumstances also result from an economic downturn.

We usually see the following during a decline:

  • Layoffs: Businesses fear the unknown and want to reduce spending when the economy begins to tumble. You can expect layoffs in business departments that aren’t critical or where companies previously overhired.
  • Less consumer spending: People are also fearful when we hit a recession. We’re scared of losing our jobs or taking a loss in the stock market. As a result, we might spend less and save more of our income for a rainy day.
  • Depressed stock market: Investors may sell their stocks and choose safer investments. So, you can expect stock prices to decline. Some corporations also don’t fare well during a recession, and their stock price reflects that.
  • Higher interest rates: This isn’t true for all recessions. But in our case, a recession may be caused due to the Bank of Canada increasing borrowing rates to tamp down inflation. This would make buying a home and making mortgage payments more expensive.

These factors can turn the residential home market in favour of the buyer. We’re more cautious about making significant financial decisions in a recession. We’re also unsure whether we can hold our job or afford increasing interest rates.

As a result, there are fewer buyers on the market. We might wait until economic conditions are more positive and confident before applying for a mortgage and making the largest purchase of our life.

But the number of sellers remains the same or even increases during this time. Some Canadians may need to sell their second home to cover costs or downsize to afford their mortgage in a poor economic environment.

Tips for Selling Your Home During a Recession in Canada

1. Rethink if You Need to Sell

Housing prices tend to peak before an economic decline and slide once a recession becomes a reality.

Selling in the middle of the downturn might not bring you the best price. Downturns tend to be buyer markets, where homebuyers have more leverage. You won’t likely have the same bidding wars or unconditional offers we saw a year ago.

Sometimes, you might not need to sell an investment property or move into a larger home right now. It’s best to consider whether entering the real estate market is required.

2. Sell Sooner Rather than Later

Past recessions show a history of dipping home prices. If you plan to sell in the near future, it’s better to do it as soon as possible. You’re only going to face tougher selling conditions.

Otherwise, you should wait until the economy is more positive before you sell. Home prices tend to fare better when there’s financial prosperity among Canadians.

3. Don’t Overprice Your Home

You might be used to seeing bidding wars and homes selling for hundreds of thousands of dollars over asking. But the market right now might not have the same prospects. You should temper your expectations to something reasonable.

Working with a real estate agent can help you set a reasonable selling price. Additionally, a realtor can guide you towards getting the best dollar for your property. They might suggest minor renovations or staging to bedazzle the prospects.

4. Give Your Home Some Minor Renovation

Minor renovations, deep cleanings, and restoring curb appeal can help move your home on the market. These changes make your home shine in photos and showings.

You don’t need to overhaul your entire kitchen. It may not be worth it in the current environment since labour is in short supply — contractors aren’t as open to negotiations or discounts. At the same time, home prices are going down.

Contributing your own labour by refreshing walls with a coat of paint or deep cleaning your carpets may be what you need to increase your chances of selling. A clean and refreshed home can help potential homebuyers envision themselves living there.

5. Consider Renting your Property Out Instead

Cities like Toronto and Vancouver are seeing record-high rent prices because surging interest rates have left prospective buyers unable to purchase a home — therefore, many Canadians continue to rent.

Some sellers who aren’t getting the offers they hoped for have turned to the rental market because the sky-high rent prices make being a landlord much more appealing.

If you aren’t in a rush to sell, renting out your property until better economic conditions might be an option to get the best return on investment from your property.

Recessions don’t have to be scary. Yes, there’s a fear of layoffs and depressed stock prices, but things rebound eventually. If you’re planning to sell your home during a recession, it’s vital to temper expectations. You can’t expect your home to sell for the same amount that homes sold for during a growing economy.

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Leaving Canada and Selling Your Property: What You Need to Know https://rankmyagent.com/realestate/leaving-canada-selling-your-property-what-you-need-to-know/ Fri, 26 Aug 2022 21:17:24 +0000 https://rankmyagent.com/realestate/?p=1637 There are many reasons why Canadians leave the country permanently. Maybe you’re returning to your home country, or there are opportunities elsewhere. Or, you might just be tired of shovelling snow off the driveway every winter, and Florida seems like a better place to spend your golden years. Whatever the case, numerous tax and legal […]

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There are many reasons why Canadians leave the country permanently. Maybe you’re returning to your home country, or there are opportunities elsewhere. Or, you might just be tired of shovelling snow off the driveway every winter, and Florida seems like a better place to spend your golden years.

Whatever the case, numerous tax and legal considerations exist when you leave Canada — especially in the home selling process.

In this article, we talk about the many aspects of selling your home as you leave Canada and what you should consider.

Non-Resident Status

When you leave Canada to live in another country, you sever residential ties in Canada. This could mean selling your home, revoking your driver’s licence, or leaving clubs and organizations. As a result, you usually become a non-resident of Canada.

You become a non-resident for income tax purposes at the latest of:

  • The date you leave
  • The date your spouse or common-law partners and dependents leave Canada
  • The date you become a resident of the country you settle in.

As a result, you aren’t obliged to pay all the same Canadian taxes as before. When you leave Canada, it’s best to speak with a tax professional to understand your obligations.

Departure Tax

One implication of becoming a non-resident is departure taxes — various taxes you must pay due to your departure.

When you leave Canada, the Canada Revenue Agency (CRA) deems you to dispose of certain types of assets at fair market value and reacquire them at the same price. This creates a capital gains tax that you need to pay. Accountants generally refer to this as a deemed disposition.

This deemed disposition on departure applies to properties like jewellery, paintings, and company shares (excluding TFSA or RRSP shares). So, your home is not deemed to be sold when you leave the country.


How to Notify CRA that You’re Leaving Canada for Good and File Your Canada Departure Tax Return

When you leave Canada, you need to file a departure tax return to notify CRA that you’re leaving. You generally need to file this tax return by April 30th of the year following your departure. The purpose of this tax return is to

  • Record the date you leave Canada and change your residency
  • Report the properties you own in Canada
  • Prepare various tax forms
  • Report and pay any departure taxes.

Leaving Canada and Your Principal Property

Capital gains are only taxable if you sell your home — suggesting it’s your principal property — when you’re no longer a resident. While, if you’re a resident, capital gains tax is generally exempt because your home is your principal residence.

When you depart from Canada, you usually have two options to deal with your principal property:

  • Sell your property while you’re still a resident of Canada and have capital gains exempted through the principal residence exemption.
  • Wait until you’re a non-resident to sell. In this case, the principal residence exemption is still generally available for the years in which you owned the property as a Canadian resident and fulfilled the other criteria for the principal residence exemption.

Selling Your Home as a Non-Resident

As a non-resident selling your home, you are liable to capital gains taxes because non-residents cannot access a principal residence exemption. In this process, you must notify CRA and complete Form T2062.

You’re generally liable to capital gains taxes in the years you’re a non-resident. For example, suppose you owned a home from 2003 to 2022.

  • The home was your principal residence between 2003 and 2018.
  • In 2018, you became a non-resident and moved out of the country.
  • In 2022 you sold your Canadian home as a non-resident.

In this case, you’re likely liable to capital gains tax between 2018 and 2022 because the property was no longer your principal residence in these years.

Once the home is sold, you need to inform CRA of the sale within ten days after the sale closes. You make this notification through Form T2062. If you don’t, there’s usually a penalty of up to $2,500. The form requires you to estimate your capital gain or loss on the sale.

The property buyer may also assist in the tax collection process by withholding taxes from the due proceeds. This amount could be 25% of the purchase price being held up for months. So it’s best to be prepared for such a situation from a cash flow perspective.

When you sell your home as a non-resident, speak with a tax professional to understand your tax obligations. It will prevent surprises from hitting you in the face when you least expect them — like a 25% withholding tax on the sale of your Canadian property.


Repay Your Home Buyers’ Plan (HBP)

The Home Buyers’ Plan (HBP) lets Canadians withdraw from their registered retirement savings plan (RRSP) to buy or build their home.

Currently, the withdrawal is limited to $35,000, and you must repay the amount within 15 years. If you don’t repay the amount, it’s included into your RRSP income on your tax return, which could have significant income tax consequences.

If you choose to leave Canada, you need to repay your HBP or face an income inclusion for the amount. The balance of your HBP is payable on the earlier of:

  • Before the date you file income tax for the year you become a non-resident;
  • Sixty days after leaving Canada.

So if you’re planning to emigrate from Canada, it’s essential to ensure you have the funds ready to return whatever you borrowed from your RRSP to purchase your home. Otherwise, you’ll be on the hook for a lot of taxes!

Leaving Canada has many tax implications. Selling your home after you’ve left the country complicates this situation. If you’re leaving Canada or selling your home as a non-resident, it’s vital to speak with a tax professional and experience realtor to understand the implications of your decision.

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Real Estate and The Metaverse: Unique Potential for the Industry https://rankmyagent.com/realestate/real-estate-the-metaverse-unique-potential-for-the-industry/ Tue, 16 Aug 2022 21:30:59 +0000 https://rankmyagent.com/realestate/?p=1615 Web 3.0, blockchain, non-fungible tokens (NFTs), and the metaverse are new technologies promised to revolutionize every industry we know. We see these topics making headlines every day in the news. Just think of how many times a day we see cryptocurrency this or cryptocurrency that. The metaverse isn’t just another Bitcoin. It’s not even a […]

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Web 3.0, blockchain, non-fungible tokens (NFTs), and the metaverse are new technologies promised to revolutionize every industry we know. We see these topics making headlines every day in the news. Just think of how many times a day we see cryptocurrency this or cryptocurrency that.

The metaverse isn’t just another Bitcoin. It’s not even a recent concept! The metaverse simply describes integrated 3D virtual worlds — imagine games like Roblox or World of Warcraft. These games have been around for decades!

But as technology advances, companies are finding new ways to put the metaverse to use. McKinsey believes that the metaverse could drive physical product sales, reduce the need for physical stores, and enhance in-store experiences. The consulting firm further found that 64% of consumers surveyed were excited about shopping in the metaverse.

This article discusses the metaverse and how it may affect the real estate industry.

What is the metaverse?

The metaverse is any online 3D world where you can interact with others via an avatar. We’re used to metaverses through video games. But companies now want to apply the technology to industries beyond gaming.

For example, instead of using a video conference to meet with someone halfway across the world, you could meet in a metaverse and engage in new ways. Integrate this experience with virtual and/or augmented reality and create a much more immersive experience than just a ZOOM call.

You could also create better digital shopping experiences. Instead of flipping from webpage to webpage, consumers may someday visit virtual malls from the comfort of their homes. Here, people could purchase real-world items in a more mesmerizing shopping experience, and this better user experience could translate to more sales.

The possibilities for the metaverse are endless. And the industry is only beginning. That’s why everyone has high hopes.

Many people are already investing in the metaverse by purchasing land in specific digital universes, hoping that the value of these digital properties will appreciate.

How does buying metaverse land work?

Some metaverses let you purchase unique digital land and other properties. Big names like Snoop Dogg and Steve Aoki already own properties in a metaverse called Sandbox. Decentraland is another popular network where people can purchase unique parcels of land.

Metaverses usually have their own cryptocurrency used as a medium of exchange. Decentraland’s currency is called MANA, for example. To purchase real estate on Decentraland, you ultimately need MANA.

After obtaining the necessary currency, the land purchase process depends on the specific metaverse. Each has its own procedures.

Many assign you an ownership ID to the digital land parcel, similar to an actual deed. Buyers may need to show proof of their real-life ID and address too. Your virtual deed could also come as an NFT.

Like the real world, these properties can be anything from houses to apartments to commercial storefronts. It can also be a plot that you develop into a customized residential or commercial space.

Unlike reality, land in metaverses is infinite. There’s also usually no travel time between two points in a metaverse. In the real world, land scarcity and a property’s location determine a building or land parcel’s value and cause it to appreciate.

A particular area of a metaverse might appreciate for other reasons, however. If you own the digital parcel beside Snoop Dogg, you could expect that that land could fetch a nice premium. High-traffic areas are generally the ones that sell for big dollars.

For example, one parcel of Decentraland land sold for $2.4 million worth of MANA in late 2021. This piece of land was located in the “Fashion Street” area of Decetraland, making it highly valuable. The purchaser, tokens.com, hopes to one day build a virtual shopping centre to sell virtual clothing for digital avatars.

In addition to infinite land, there’s also the potential for infinite metaverses. If Google, Meta, and other large tech companies all started a consumer-targeted metaverse, this could reduce the popularity of Decentraland or Sandbox and then reduce the value of all land there as investors rush to invest in a new metaverse.

Just think of the rise and fall of other websites and networks! You don’t know if your metaverse will be the next MySpace or Tumblr.

How Could the Metaverse Affect Tangible Real Estate?

While the potential for a new way to “invest” in real estate might become viable someday, how can the metaverse affect the real estate we know? One way is through more immersive showings and the ability to meet online in the metaverse.

Realtors currently use many ways to display a property. Photos are the most common. But videos, 3D renderings, and 360-degree cameras are increasing in popularity too.

But imagine a metaverse where potential buyers can walk through online replicas of houses on the market. Suddenly, buyers in foreign locations can view a listing as if they’re there. This could help increase the draw and attraction of a house and encourage more buyers.

Simultaneously, a realtor can take buyers through the property and interact with them in the metaverse as if it was a real-world showing.

The metaverse could also change home buying by giving buyers, sellers, and brokers a place to meet. As a buyer or seller, you may someday have an initial consultation with a realtor in the metaverse when an in-person meeting isn’t viable. Or, suppose you meet your mortgage broker in the metaverse. The ability to show and view facial expressions and body language could help you explain your needs and allow realtors or brokers to reveal how they can help.

The metaverse is not a new technology. But many companies are now trying to apply it to new industries. Buying and selling real estate in the metaverse has significant actual dollar values, though it comes with numerous risks.

For real-world homebuyers and sellers, the metaverse has numerous applications in how we’ll someday view a home or meet with the people who help us in the home purchase or sale process.

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3 Tips to Downsize Your Home https://rankmyagent.com/realestate/3-tips-to-downsize-your-home-in-2021/ Tue, 05 Oct 2021 18:54:17 +0000 https://rankmyagent.com/realestate/?p=1350 In recent years, minimalism has become a big trend in North America. Minimalism is a lifestyle of living with less and only owning what truly brings value to your life. The idea of minimalism has been part of real estate for years, where homeowners decide to downsize their possessions and home. This process is typical […]

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In recent years, minimalism has become a big trend in North America. Minimalism is a lifestyle of living with less and only owning what truly brings value to your life. The idea of minimalism has been part of real estate for years, where homeowners decide to downsize their possessions and home. This process is typical with older individuals and couples whose children have moved out. As a result, they may no longer need the amount of square footage that their home provides.

Downsizing allows homeowners to turn some of their home equity into cash by selling their current home and moving to a more affordable home or area. This move further helps reduce monthly bills such as heat and hydro, reduce the amount of cleaning and home maintenance, and possibly allows you to move to an area that’s closer to loved ones or with more green space.

If you’re considering downsizing your home, this article provides three tips on how to do so. The article goes over:

  • What to consider to determine if downsizing is right for you and what the alternatives are;
  • How to create a plan to declutter your belongings and prepare for moving to a smaller space; and,
  • What you should consider when purchasing your next home.

Consider if Downsizing is Truly the Right Decision

Downsizing sounds excellent in theory. But there are numerous drawbacks that downsizing advocates don’t mention. It can be great for some but not for others.

A lot of people downsize for the financial incentive. However, one survey found almost 30% of downsizers said the cost of downsizing was more than expected. Selling your current home and buying a new one is an expensive process. There are numerous costs associated with it, including realtor commissions, legal fees, and home staging costs. You may also consider making a few renovations to maximize the amount you can sell your home for. This can range from a new paint job to a kitchen remodel.

There are also emotional costs to downsizing. Many older people have lived in their current homes for decades. They’ve grown accustomed to routines, the neighbourhood, the size of their home, and much more. Moving to a new space, community, or even city can be a massive shake up that you didn’t prepare for. Suddenly, you have to form new friendships with the neighbours or find a new coffee shop for your weekly brunch. The reduced space also means you’ll need to throw out a lot of your old belongings. And you won’t have as much space to entertain friends and family.

If you need additional funds for retirement but want to keep your home, an alternative is a reverse mortgage. A reverse mortgage lets you access your home’s equity without the need to move to a new home. This removes the potential costs and emotional risks from the equation.

Create a Plan to Declutter Your Belongings

The decluttering process can be challenging. Downsizing leaves you with less space than your current home, so it’s mandatory to relieve yourself of some possessions.

You can start the downsizing process before committing by decluttering your belongings. This means throwing out, giving away, and selling items that you no longer use. Throwing a yard or garage sale is a great way to go about this and bring in a bit of cash. This process can help you account for all the items in your home and reveal whether you have any deep attachments to specific things.

Once you decide you want to downsize and start looking at homes, you’ll want to develop a decluttering plan so that you’re not overburdened with deciding what to throw out later on. To do this, start with understanding what restrictions you’ll have. For example, how much square footage will your living space be reduced by? Next, list items that you must keep. This likely includes heirlooms, family photos, and the things you use daily. Give away, sell, donate, or store the items that aren’t on your “must keep” list.

Even if some items were expensive, there’s no point in keeping them around if you don’t use them. Hopefully, that item retained its value, and you can recoup some of its costs by selling it online.

Think of What Your New Home Needs for the Long-Term

Due to COVID-19, the condo apartment market in populous cities has declined in price and demand. This may be great news for the 32% of boomers looking to buy a a condo within the next five years. Some of these boomers may move in. But a condo apartment may not be the ideal living situation for everyone’s retirement lifestyle.

When you downsize, remember that this is where you may end up living out your golden years. You want a home with features and a neighbourhood that accommodates you now and 20 years down the road. For example, a walk-in tub or shower over a bath will be better if your mobility gets weaker with age. Living in a safe community with parks and nearby hospitals is also essential. Further, high-rise condominiums may not be the best choice. If elevators are not functioning, it may mean you need to take a flight or two of stairs, which become more difficult as you age.

Speaking to a real estate agent with experience in helping home sellers downsize is a significant help. These agents have the expertise to understand what to look out for to accommodate your current and future needs. They can also provide advice on the declutter and moving process.

Downsizing is a big move for anyone. It involves a lot of consideration in whether it’s the right choice, how to declutter your belongings, and what you’ll need for the long-term. But it also has many benefits such as extra savings and reduced maintenance for your home and lifestyle.

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How to stage your home to sell in the virtual world https://rankmyagent.com/realestate/how-to-stage-your-home-to-sell-in-the-virtual-world/ Fri, 07 May 2021 18:39:38 +0000 https://rankmyagent.com/realestate/?p=1451 Staging is vital to the home-selling process. Although houses in some real estate markets are flying off the shelves, more demand for your home can mean a higher sale price—something most people wouldn’t complain about. But with COVID-19 and a migration to the digital world, staging your home isn’t only for showings and open houses. […]

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Staging is vital to the home-selling process. Although houses in some real estate markets are flying off the shelves, more demand for your home can mean a higher sale price—something most people wouldn’t complain about.

But with COVID-19 and a migration to the digital world, staging your home isn’t only for showings and open houses. Staging your home is also crucial for the photos and videos used to sell your home. These marketing assets will make the first impression on potential buyers.

In this article, we discuss how to stage your home for the virtual world and how COVID-19 may change how you should stage your home in 2021.

The home staging basics

Decluttering and cleaning are still important

Decluttering and deep cleaning your home is an effective way to stage your home. This remains true for staging in the virtual world. Decluttering can make your home seem more elegant and help potential buyers imagine themselves moving in.

Although people won’t be visiting your home in person (just yet), it’s still essential to deep clean your rooms. Often, the dirt, dust, and grim around your home can add up and provide a sense that your house isn’t for the person looking at the photos of your rooms. Unclean windows, a fine layer of dust on your furniture, or a stain on the rug can quickly put someone off.

Small renovations can help you shine

Painting your rooms can be one of the easiest ways to freshen things up. It can turn an old room into a new one. A fresh coat of paint removes any stains, marks, or scratches—no matter how small—from being noticed. This can also reduce the cost of virtually staging your home as the photo editor will have fewer details to clean up (more about virtual staging later in this article).

Enlist small decorations

Commonly, what sets apart a fancy home from a regular one are the details and minor decorations that add up to a certain suave in a room. For example, hardcover books, throw pillows and blankets, potted plants, and artwork can add a lot to a room and jazz it up. The best part is that these items are usually easily accessible from places such as Amazon, so you don’t even need to leave the comfort of your own home.

Consider how COVID-19 trends have changed home staging

Home offices and gyms are now in-demand spaces

COVID-19 has changed what buyers look for in a home. People are moving to the suburbs and to larger homes as they envision a home gym or office to compensate for their inability to have a gym or office like before.

Instead of staging an area as a second dining or living room or as a storage closet, these places could be better set as a home office. You could further stage an empty basement with a set of dumbbells or even a squat rack to expand a potential buyer’s imagination. Other possibilities could include a home classroom, media room (to replace movie theatres), or spa area.

Create an outdoor retreat

The pandemic has also driven demand for private outdoor space. People, more than ever, want fresh air without being in public. Staging your outdoor patio with excellent patio furniture or even a fire pit can create a sense of an “outdoor retreat” that buyers are willing to line up for. It creates an opportunity to entertain guests when the weather is warmer while reducing the fear of COVID-19 transmission.

DIY or professional stager?

This generally centres around declutter and trying your best to make everything appear fresh and pretty for the pictures that’ll sell your property.

However, stagers have also adapted to COVID-19. Some stagers are now offering their services virtually. You can take them around your home via FaceTime or Zoom as they provide suggestions on how you can spruce the place up. Another alternative is to find a real estate agent who also provides home staging services.

A stager can be expensive. Especially with furniture rentals, it can amount to thousands of dollars. However, it’s commonly worth the cost. A well-staged home can help your property stand apart from others in the market and ultimately increase the final selling price.

If you do look for a professional home stager, you want to look out for the following:

  • Portfolio: What was their past work like? What do their prior clients say about them?
  • Professionalism: Do they act professional when they communicate with you? Do they get deliverables to you when they say they will?
  • Real estate knowledge: A stager who understands the real estate market understands what’s in demand and can orient your home to fulfill such market demands.

What about virtual staging?

Virtual staging beings with a photographer taking photos of your rooms. The photos are then sent to a virtual stager who uses software to achieve a particular look akin to a staged home. This effectively removes the need to rent furniture when staging your home (an enormous cost and hassle).

Virtual stagers can remove or add in pieces of furniture, change a room’s colour schemes, or even change whole areas of your home. This type of service is more important than ever as demand for staging has increased due to an increased dependency on real estate photography to drive sales. At the same time, traditional home staging has become more complex with COVID-19.

This method of staging is also more cost-efficient. Virtual staging services can cost anywhere between $16-$100 per photo. Although it’s common to have 20 pictures for a single home listing, rooms such as washrooms and closets likely won’t require this treatment. As a result, you’re probably not looking at thousands of dollars to virtually stage your home.

Staging your home is a great way to make it stand out from other properties in your area. It can ultimately help you sell your home for a better price at a faster rate. There are many options to stage your home, such as DIY, a professional stager, or doing it virtually. Whichever option you choose, you can be sure that it’ll likely add value to your selling process.

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A Canadian’s guide on the principal residence exemption https://rankmyagent.com/realestate/a-canadians-guide-on-the-principal-residence-exemption/ Thu, 04 Feb 2021 16:59:52 +0000 https://rankmyagent.com/realestate/?p=1402 As the adage goes—nothing is for sure but death and taxes. To make this post less morbid, we’re going to talk about the latter—taxes. Specifically, capital gains taxes. Capital gains tax occurs when Canadians sell any real property, such as a house or piece of land. It’s calculated as the difference between how much you […]

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As the adage goes—nothing is for sure but death and taxes. To make this post less morbid, we’re going to talk about the latter—taxes. Specifically, capital gains taxes. Capital gains tax occurs when Canadians sell any real property, such as a house or piece of land. It’s calculated as the difference between how much you purchased the real property for and how much you sold it for.

Capital gains tax is generally taxed at half the rate of income tax but can be entirely exempt through the principal residence exemption. That means, if your property is considered a principal residence, it may be entirely exempt from capital gains tax!

In this post, we’ll explain exactly what makes a property a principal residence and what the limitations are on this powerful tax exemption.

What is a principal residence?

Though this may seem like a bunch of vague terms, we can further break down some points.

A housing unit refers to a house, cottage, condominium, apartment, trailer, mobile home, or houseboat. Any of these types of properties can qualify as a principal residence and thus be exempt from capital gains tax. The ability to claim properties other than your regular home is helpful in cases where a cottage is growing in value faster than your home, meaning you can use the principal residence exemption on your cottage instead.

Designating a principal residence

You designate a property as your principal residence when you sell it, and you can mark it as your principal residence for any amount of time up to the number of years you’ve owned it. There is also the ability to pick and choose which years you want to designate the properties you own as your principal residence. For example, your main home can be your principal residence between 2007-2012 then your cottage can be your principal residence between 2013-2019. Just remember that you’ll need to pay capital gains tax for every year a property wasn’t designated as a principal residence.

In the past, you could sell your principal residence and not even report it to the Canadian Revenue Agency (CRA). However, changes in 2006 meant to close tax loopholes changed this, and basic information of the sale of a principal property has to be reported on your income tax returns for you to claim the full exemption. If you don’t report the sale, you may be liable for capital gains tax on the sale, late charges, and interest.

Although it would be amazing to have more than one principal residence, each taxpayer can, unfortunately, only have one. For years after 1981, it’s taken a step further and broadened from a taxpayer to the whole family unit. This means that if you designate the family home as a principal residence, your spouse can’t go and designate the cottage as his/her principal residence.

Ordinary residence

So, what if someone designates a property as their principal residence but doesn’t actually live there… What if they own the property as an investment and spend their life living in Florida? Well, that’s where the ordinary residence rule comes in.

For a property to be a principal residence, the owner, the owner’s spouse or common-law partner, or the owner’s children have to occupy the property “ordinarily”. What “ordinarily” means is quite ambiguous once it gets to the courts. With this being said, however, a seasonal residence such as a cottage or houseboat does come within this definition of “ordinarily reside”.

½ Hectare rule

With these rules on principal residence, it might seem like a great idea to buy one big chunk of land and designate it as your principal residence. Unfortunately, the exemption also limits you to how large a principal residence is—i.e., ½ a hectare or 1.24 acre. But, if you can show that you need more land to enjoy your home—for example, your city has a minimum acreage residential zoning requirement or if you need more land to reach city roads—then your principal residence can go beyond the ½ hectare.

Earning income with a principal residence

If you change your principal residence to a rental or business property, you can continue to assign it as your principal residence. The only catch is that you must report the net income derived from the property and that you can’t claim any capital cost allowance (i.e., tax deductions for depreciation) on that property. This can continue for four years and be extended if all the following are met:

You can also continue to use your home as your principal residence if you’re renting part of it out while living at the property. If this is a duplex or triplex, where you live in one unit and rent out the rest, then you would claim your unit as your principal residence and the others would be subject to capital gains tax.

If there are no clear divides in which portion of the home is a rental and which part is where you and your family reside, the CRA generally finds that the property can retain its principal residence exemption as long as there were no structural changes to accommodate the rental and there were no capital cost allowances claimed. These rules extend to renting out your property as an Airbnb

The principal property exemption is a powerful tax rule in Canada. It can allow you to be completely exempt from capital gains taxes when selling your home. Due to its power, there are many conditions you need to meet to make a property a principal residence, and there are also various ways to work with the exemption to maximize tax deductions. It’s best to check with your accountant and realtor to see how to really get the best of this exemption.

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