Should you sell or renovate? How to make the best decision
Last updated on April 6, 2023
Many people wonder if they should sell or renovate their home when it no longer suits their needs. Before making a decision, there are a number of factors to weigh, including the costs and the impacts on your daily life—not to mention the state of the real estate market.
Here are a few things to consider.
Summary:
- Selling: Starting fresh
- Renovating: Giving your home a makeover
- Renovating to sell
- Renovating or moving: A personal choice
Selling: Starting fresh
While “new” isn’t always better, selling and starting fresh is the right choice for many homeowners. For example, those whose property is not worth investing time and money in, people who don’t want to embark on a major renovation project, homeowners whose rooms are much too small for their needs or, inversely, someone whose house is much too big for them.
The key is to start by drawing up a list of needs. What do you want in your next house that you don’t currently have? Here are some examples:
- An extra bathroom
- More storage space
- A better neighbourhood
You should also consider all the costs associated with selling your home, buying another and moving.
The costs
While renovation costs are often easier to envision, don’t overlook expenses involved in selling, such as:
- the cost of a DuProprio package or the commission paid to a real estate agent
- the cost of minor renovations and maintenance work to prepare the home for sale
- notary fees
- the cost of getting an updated certificate of localisation, if needed
And of course, don’t forget the difference you may have to pay for a house that better meets your needs. Then, there are other expenses involved in buying a new home:
- Moving costs
- Connection fees for cable, Internet, etc.
- Property transfer tax (also known as the "welcome tax")
- Costs of having a pre-sale inspection done by a building inspector
- Etc.
Selling your current home and buying a new one can be the less expensive option if your home needs a lot of work. Carefully comparing the two choices will help you make an informed decision and avoid unpleasant surprises.
The related impacts
Selling and moving has many advantages and disadvantages, which is why the decision should not be made lightly. The main benefit is moving into a home that better meets your needs, without having to endure lengthy renovation work. On the other hand, the decision to sell can cause stress and resistance to change from family members. For many people, having to rebuild a routine in a new home and a new neighbourhood can be anxiety-inducing. Also, don’t underestimate your own—and your family’s—emotional attachment to the property and the memories it holds.
Beyond calculating the costs, you have to weigh all the pros and cons!
Real estate market conditions
One of the key questions to ask yourself when trying to decide whether to sell or renovate your home is what are my chances of selling in the current market? If you’re leaning toward moving, it would be wise to check how active the real estate market is in your area and how long homes usually take to sell. This will help you determine whether selling will meet your needs in the short or medium term.
Also ask yourself if the work that needs to be done to update your property could scare off potential buyers. Most aspiring homeowners want a move-in ready home!
In short, if your area is in demand, you are probably better off selling than renovating, provided that you don’t plan to buy a new home at a comparable or higher price. If your neighbourhood is in a balanced or buyer’s market, you should compare the time and costs involved in renovating to those involved in selling, buying and moving. This will help you make the best decision.
How to sell a house that needs work
Selling a home that needs major work can be a challenge. Read our tips on how to present your home to buyers with full transparency and what precautions to take to avoid problems down the road.
Renovating: Giving your home a makeover
Renovating your current home is a good option if it is located in a sought-after neighbourhood that you love and would like to live in for a long time to come. It is very feasible to carry out work that both increases your quality of life while increasing the value of your property.
It all depends on the type of renos you are planning, the costs involved and the time required.
The costs
To help you decide whether to sell or renovate, you must first calculate how much your dream renovations will cost. To get a good idea of the expenses to expect, first determine your needs and expectations, then talk to several reliable contractors, such as those in the RenoAssistance network, to get detailed quotes. Costs may include:
- Professional service fees (architect, designer, etc.)
- Labour
- Materials
- Permits
- Decor and furnishings
- Unexpected expenses
- Storage rental fees (if needed)
Note that some work, such as piping, cabling and digging can be more expensive. It may be helpful to get advice from a chartered appraiser before starting major work, to know your potential return on investment.
Deciding to renovate your property and increase its value could also result in additional costs such as:
- Changes to your home insurance
- Higher electricity bill
- Etc.
The related impacts
With renovations come dust, noise and likely some “surprises.” As exciting as renovations can be, they require a lot of decision-making, costs and delays. It can be difficult to cope with the financial and personal stress. This is why you must prepare yourself mentally to have your routine disrupted and even experience tension in your household during renovations.
Here are some tips that can greatly improve your experience:
- Plan your project carefully
- Communicate well and listen to your family members
- Go with the flow, be flexible
- Take breaks and vacations
- Practice self-care and make time for exercise
- Stay elsewhere during the renovations (if possible)
Even if you follow these tips, renovations are not for everyone! You have to be able to cope with the stress and remain available. For some homeowners, it may be wiser to opt for less extensive work or simply refresh the property. If you do decide to embark on a renovation project, remember that the noise and dust are only temporary, and the results will surely be worth it!
Paying for your renovations
There are different ways to fund the work:
- Use your savings (cash or investments)
- Refinance your mortgage (up to 80% of your home’s market value, depending on the equity you hold)
- Apply for a home equity line of credit
- Get a personal line of credit or take out a loan
- Pay by credit card
Consult a financial advisor to look over the financing options available to you. There are also several government or municipal grant programs to help you update your property or make it greener.
Renovating to sell
In addition to renovating or selling, there is a third option: renovating your home to sell. The idea is to improve your home’s condition and appeal, in order to increase its value. A renovated property is likely to sell more quickly. Also, some necessary work, such as a roof due to be changed or a lack of insulation, could make your home less attractive to buyers. Performing a pre-sale building inspection will help you target the most strategic work.
The Appraisal Institute of Canada reveals that some renovations pay off more than others. as well as repainting the interior and exterior generate a big return on investment. Conversely, doing landscaping or adding a solarium are more of an amenity value.
Thinking of buying a home to renovate and resell?
Be sure to familiarize yourself with Canada’s residential property flipping rule, nicknamed the “anti-flipping” rule. The renovation costs plus what you could owe in taxes might eat up your profits and then some!
Renovating or moving: A personal choice
As you can see, there are many financial, emotional, family and societal factors to consider when deciding whether to sell or renovate your home. Every situation is unique, and ultimately depends on how much you want to invest, the state of the real estate market, and your current and future motivations.
Before making a decision, take the time to analyze your situation, lifestyle and needs, and assess the potential impacts of renovating or moving. There are advantages and disadvantages to each.
Here's a reminder:
If selling is the best solution for you, trust in your ability to do so without a go-between! With the help of our professional team, you will have all the tools and advice for a successful transaction. Learn more by watching our short webinar or schedule a call with one of our advisors to discuss your plans to sell!
