Tag Archives: real estate

15 home insurance myths to stop believing now

home insurance

Source: Moneyense.ca – by  

Find out what your home insurance does and doesn’t cover

Home insurance can be a tricky topic, and if you’re not reading the fine print, you could be relying on inaccurate myths to inform your coverage decisions. Luckily, InsurEye, a Canadian insurance education site has compiled a massive list of 111 insurance myths that are out there. Last month we looked at the top 10 auto insurance myths to debunk. This month we’ll look at the top 15 home insurance myths and get the facts.

1.MYTH: You must have home insurance.

FACT: Unlike auto insurance, home insurance has not been made mandatory by the government. If you own the property and have a mortgage on it, often, your bank or lender will require that you hold an active home insurance policy and name them on that policy. If you do not own the property but are renting it, your landlord may require that you have renter’s insurance.

2. MYTH: If I am away on vacation, my house is covered.

FACT: If you simply leave for vacation without taking precautions, you are not always covered. Thus, if you go away during the “usual heating season” then you usually need to either:
Shut off the home’s water supply and empty all pipes or take steps to ensure the home’s heating is maintained. If you don’t take one of these two precautions, then you may not be protected against water damage resulting from frozen pipes that burst. Check with your provider to determine what length of vacation requires you to take extra precautions, such as somebody visiting your place on a regular basis in your absence. Different policies may require different frequency of those visits, but in general it is every 3-7 days.

3. MYTH: If I have valuables, they are covered.

FACT: A standard home insurance policy covers your personal property and most valuables up to the selected limit of insurance. It’s important to note that sub-limits often apply to specialty property, like jewellery or furs. For these items, you have the option of adding coverage to your policy. Often, you will need to provide proof of value (e.g. an appraisal or a receipt).

4. MYTH: If I have a home insurance policy, I am protected against sewer backup.

FACT: Sewer backup damage occurs when the sanitary and storm sewer systems cannot handle high volumes of water, which causes water to back up into your home through toilets and drains. As is the case with freshwater flood protection, most providers offer some sort of OPTIONAL sewer backup protection, but it is not usually included on default standard insurance policies. Just a few providers include it in their standard home insurance policies.

5. MYTH: My insurance protects me against flooding.

FACT: It depends on the type of insurance policy you have. Typically, a home insurance policy protects you against sudden and accidental entry, or release of, water in your home (e.g. burst pipes).

A standard home insurance policy often would not protect you against “overland flooding” (when water flows over normally dry land and enters your home through doors and windows, such as due to a river overflowing its banks or snow melting).

Prior to 2015, flood insurance was not available in Canada at all. Instead, homeowners and renters had to rely on the disaster financial assistance programs offered by the government. Today, most home insurance providers offer some sort of freshwater flood OPTIONAL protection. A few providers, such as Square One Insurance, automatically include it in all eligible policies.

6. MYTH: My home insurance only covers the house.

FACT: Home insurance policies cover your house and its contents. They also cover any detached structures on the property, additional living expenses you may incur if the house is uninhabitable, and personal liability exposures you may face.

For condos, policies also cover unit owner improvements and some assessments made against you by the condo corporation. Make sure that you have a thorough understanding of what it covers. Our overview of condo insurance (including quoting) will explain the details of condo insurance coverage.

7. MYTH: Home insurance covers the market value of my house.

FACT: Home insurance does not cover market value, only the rebuilding or replacement value of your house. If your house burns down, the purpose of home insurance is to cover the costs required to re-build the house as it was before the loss. Rebuilding value is typically lower than market value because it does not include the value of the land. Back to the example of your house burning down, the land is still there so your insurance does not need to “replace” the land. An insurance policy can often include costs to clean up the debris, such as after a fire.

8. MYTH: Home insurance covers earthquakes.

FACT: Your home insurance covers earthquake damage only is you purchased an “earthquake rider” on your policy. These are mostly meaningful in British Columbia and Quebec. Some providers, like Square One Insurance, automatically include earthquake protection in their policy.

9. MYTH: Insurance is cheaper for older, less expensive homes.

FACT: Insurance is usually more expensive for older houses since there is a higher chance that something will go wrong, and it will cost more for the insurer to fix it. Also, many older house elements, such as plumbing, are more likely to fail than plumbing in new homes that use upgraded pipes and materials.

10. MYTH: Insurance covers damages caused by termites and other insects.

FACT: Usually not. Make sure that you know how your insurance policy treats this kind of damage.

11. MYTH: Condominium corporations provide insurance that covers my condo.

FACT: Condominium corporation insurance will cover the overall building structure, its exterior finishes, roof, windows and common areas like elevators and hallways. It does not cover the contents of your condo, its upgrades and 3rd party liability should you cause damage to other condo units (i.e. via flooding).

12. MYTH: If I am a tenant, my landlord’s insurance covers everything—it is his/her responsibility.

FACT: No. Landlord’s insurance does not cover your liability (i.e. if you flood your neighbours) and your contents (if something is stolen from your unit). A landlord may require you to have a tenant insurance policy.

13. MYTH: Damage from natural disasters or Acts of God are excluded by home insurance.

FACT: No, there is no such thing as an Act of God exclusion in home insurance policies. In fact, most policies cover damage from hailstorms, lightning, wildfires, etc. Optional coverage is available for certain types of natural disasters, like earthquakes. Other types of natural disasters, like seawater flooding or landslides, are excluded.

14. MYTH: If I get in a fight with someone and they sue me, my home insurance will defend me and cover any costs.

FACT: No, the personal liability protection included in your policy only covers accidental and unintentional injury of others or damage to the property of others. So, if you intentionally injure someone, you’re on your own.

15. MYTH: If my dog bites and injures someone, my home insurance will not protect me. I need a special insurance policy.

FACT: As long as you properly answered any questions relating to your pets in the application and investigation process, then your policy will cover costs associated with your dog biting and injuring a third party.

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Mississauga Moves Towards Making Housing More Affordable

Source: Insauga.com – by Ashley Newport on October 17, 2017

It’s no secret that housing in Mississauga (and the overall 905 area) has become increasingly more expensive over time. With detached houses costing buyers $900,000 to $1 million and compact condos selling for over $400,000, residents are turning to the rental market and being equally as disappointed to see that prices are no more kind there (in some cases, two-bedroom suites can cost close to $2,000 a month).

The housing crisis is one that Mississauga has been, to its credit, taking seriously.

The City of Mississauga’s Planning and Development Committee recently adopted the city’s first housing strategy: Making Room for the Middle: A Housing Strategy for Mississauga.

According to the strategy, there’s a pressing and dire need to create affordable housing for middle income earners who are in danger of being priced out of the city.

Some of the draft’s findings are alarming, even though they’re not at all surprising.

Some key facts:

  • A home is considered affordable when its inhabitants spend 30 per cent or less of their earnings on housing costs
  • 1 in 3 households are spending more than 30 per cent of their income on housing and research suggests this number will rise
  • Middle income households typically net between $50,000 and $100,000 a year
  • Middle income earners include nurses, teachers and social workers
  • People who want to purchase homes can typically afford to pay between $270,000 and $400,000, meaning their only options are condos and a limited selection of townhouses
  • Housing prices are adversely affected by supply and demand imbalances (there’s much more demand than there is supply)
  • The average rental unit costs $1,200 a month
  • Rental inventory is 1.6 per cent (which is troublingly low)

The city is focusing on middle income earners because they typically make too much to qualify for government assistance, but still cannot afford to rent or purchase homes in the city. When people are priced out of their communities, the social and economic fabric of the area is compromised. If the middle class is forced to move further away, the city will only be suitable for very high and low-income earners–something leaders are hoping to prevent.

The city says the Strategy is Mississauga’s plan for fostering a supportive environment for the development of a range of housing that is affordable for all. While it targets middle-income households, it will also benefit lower-income households.

To be clear, the Region of Peel is responsible for subsidized housing (meaning housing associated with low-income earners who require special assistance to afford adequate shelter in Mississauga, Brampton and Caledon). While attention must still be paid to lower-income residents (Peel has a notoriously long subsidized housing waitlist and too few shelters for those in need), middle-income households have not been widely supported in terms of housing supply.

Generally speaking, middle-income earners—think social workers, journalists and clerical workers—do not qualify for financial assistance and cannot afford housing at current market prices.

Ideally, the strategy will help provide opportunities for lower-income households by freeing up supply.

The strategy offers 40 actions supported by the Mississauga Housing Advisory Panel, a group of over 20 housing professionals from the public, private and non-profit sectors that shared their knowledge, advice and solutions. It also includes a five-year action plan centred on municipal powers and funding partnerships to achieve its goals.

“Housing is an issue that touches every Mississauga resident and business,” said Mayor Bonnie Crombie. “Council has already endorsed in-principle, actions to protect existing rental housing and create a housing-first policy for surplus lands. Making Room for the Middle: A Housing Strategy for Mississauga is the City’s plan to provide, together with our partners, a supportive development environment for a range of affordable housing.”

So, what has the city proposed?

  • Petition senior levels of government for taxation policies and credits that incent affordable housing
  • Pilot tools such as pre-zoning and a Development Permit System to develop affordable housing in appropriate locations (close to transit systems, for example)
  • Encourage the Region of Peel to develop an inclusionary zoning incentive program for private and nonprofit developers
  • Continue to engage with housing development stakeholders
  • Encourage the Region of Peel to investigate the cost of deferring development charges on the portion of affordable units provided in newly constructed multiple dwellings

The city has also been working to legalize accessory units (better known as basement apartments). At this juncture, basement suites remain a very viable option for people looking for affordable units, as the suites tend to cost $1,000 or less. Right now, most units remain unregistered and the city is responsible for levying fines against landlords operating unregulated units.

“Making Room for the Middle: A Housing Strategy for Mississauga defines how the City of Mississauga will address the affordable housing crisis in our City,” said Crombie in a statement. “We’re ready to do our part to ensure that those who want to live in Mississauga can afford to do so. The strategy provides bold, innovative solutions to increasing affordability. Safe, affordable housing is a pillar of a complete city and we will achieve our goals if we work together with our partners to create a supportive development environment for a range of affordable housing for all.”

According to the staff report, the strategy has received wide support since its release on March 29 from residents, agency partners and the building and development industry.

Speaking of the development industry, it appears that one affordable housing project is already in the works.

A few weeks ago, we learned that a brand new building development has been planned for the City Centre area.

The Daniels Corporation, the development firm who has built multiple properties in the City Centre and Erin Mills Town Centre areas in the city, is slated to construct an affordable housing project at 360 City Centre Drive.

Since this building will help the city fulfill its mandate, council will a provide a sizeable $2.7 million to the Region of Peel to offset development charges for the project.

The Region approved funding of the much-needed project to the tune of $65 million ($65,966,522, to be exact) on June 22. After approving funding, the Region asked Mississauga to “consider granting relief from City Development Charges (the aforementioned $2.7 million) by waiving or providing a grand to offset such DCs.”

As for how the development will work, 40 per cent of the units (70 in total) will be Rent Geared to Income suites. These units will take residents off affordable housing waitlist. The city also says that 60 per cent (or 104 units) will be set aside for renters and owned by the Region. They will be available to middle-class residents.

A second tower on the same podium will boast market-value units, creating a mixed-income property on City Centre grounds.

The movement of the affordable housing strategy is encouraging, especially since the city has been working to build consensus for sometime now.

The Mississauga Housing Forum held last spring enabled stakeholders to hear from renowned housing experts, “road test’ the strategy and provide their input. City staff say they have since have fine-tuned the strategy based on the feedback received.

“We heard from our residents and stakeholders and are taking action,” said Ed Sajecki, commissioner of planning and building. “Our strategy reflects the input we received. We can now create, together with our partners, a housing affordability solution that could be a model for other Canadian cities.”

The city says the next steps include actions to help preserve purpose-built rental housing, support for the Region of Peel in implementing its programs, and ongoing work with senior levels of government to make their surplus land available for affordable housing and provide standardized local housing data to measure housing affordability.

The final strategy will go to Council for approval on October 25.

 
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Court orders developer to reveal condo-flipper info

THE CANADIAN PRESS

A Federal Court judge has approved at least one court order that will require a British Columbia developer to turn over information to tax officials about people who bought and flipped condo units before or during construction.

And several similar applications are under way, reflecting the federal government’s efforts to crack down on potential tax cheating in the presale market.

A July 25 Federal Court order requires the developers of the Residences at West, a Vancouver condo project at 1738 Manitoba St., to provide the Canada Revenue Agency (CRA) with documents related to presale flips, also known as assignments, in the building, including proof of payments and correspondence between the developers and people who buy the assignments.

That order followed a June 29 application from the federal government.

In September, the Minister of National Revenue applied for court orders related to One Pacific, a Concord Pacific project, and Telus Gardens, a downtown project developed by Westbank Corp.

Both developers said they would comply with the request for documents.

“Customer information is protected by privacy laws and is not at the developer’s liberty to disclose unless ordered by the Court,” Matt Meehan, senior vice-president of planning at Concord Pacific Developments Inc., said in an e-mail.

“To protect our customers’ information and ensure any release will be compliant with the law, we have asked CRA to obtain a court order, which we will adhere to.”

In an e-mailed statement, Westbank said it would comply with the minister’s application.

The CRA is investigating potential tax cheating in the presale market.

Developers presell units in projects to obtain bank financing. Those sales agreements can be “assigned,” or flipped, to somebody else before the building is finished.

A unit may be flipped several times before a project is completed. But only the transfer of legal title from the developer to the final purchaser is registered with the B.C. land title office.

That means the CRA does not know the identities of any buyer but the final one, and has no way to check whether the others have paid applicable taxes on those transactions.

The provincial government last May announced new regulations designed to limit assigning: Sellers have to consent to the transfer of the contracts, and any resulting profit must go to the original seller. But those new rules apply to single-family homes, not condo presales.

As the CRA heads to court to obtain data on presale buyers and sellers, some observers say the provincial government could cool speculation in the presale market – and support federal tax-enforcement efforts – by changing reporting requirements.

Presale purchasers may include people who are not Canadian residents and whose profit from flipping a presale contract would be subject to a federal withholding tax, said Richard Kurland, a Vancouver immigration lawyer.

He used the example of a person from Iran who buys a presale contract for $100,000 and sells it for $125,000 a month later. Under the Income Tax Act, that profit – because it went to someone who is not a tax resident of Canada – would likely be subject to a 25 per cent withholding tax, he said.

“If nobody knows that you’re from Iran and not a tax resident, and nobody withholds the money, you just walked off with $6,000 tax-free,” he said.

If information on buyers’ identities were routinely provided, the agency could more readily check to determine if, for example, anyone was claiming the principal-residence exemption on more than one property, Mr. Kurland said.

Asked if the CRA would like the province to make changes such as requiring routine disclosure of the identities of presale buyers, agency spokesman Bradley Alvarez said in an e-mail that, “any additional information, including that obtained from other governments and third parties, enhances the CRA’s ability to detect non-compliance.”

The CRA has found some flips are reported incorrectly or not at all and “the CRA welcomes any endeavours to obtain any information that can assist the Agency in detecting non-compliance.”

Developers support the CRA’s goals, but have to take privacy regulations into account, said Anne McMullin, president of the Urban Development Institute.

“It’s not the developers not wanting to hand over information, it’s, ‘Let’s do this safely,’ because of privacy laws,” Ms. McMullin said.

The NDP, which came to power after the May election, had said while in opposition that the Liberals were not doing enough to curb speculation in B.C. real estate.

In its election campaign platform, the NDP promised to set up a multi-agency task force to fight tax fraud and money laundering in the B.C. real estate marketplace.

Finance Minister Carole James was not available for an interview.

In a statement, her office said the province is monitoring the federal government’s court action, and tax fraud is “something that is taken very seriously.”

The B.C. government is working on a comprehensive housing strategy, and any policy or legislative changes will be made public once that strategy is developed, the statement added.

 

Source: The Globe and Mail –  AND 

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Still thinking of home ownership as an investment? Here’s proof you’re wrong

 

Source: The Globe and Mail

Take some advice from rookie home owner Desirae Odjick about houses as an investment.

As a personal finance blogger, she ran the numbers on the cost of owning a home and concluded that breaking even would be a good outcome when it comes time, many years down the road, to sell. “A house is not a long-term investment,” she said in an interview. “It’s not a miracle financial product. It’s where you live.”

The idea that owning a house is an investment is so ingrained that a recent survey found one-third of homeowners expect rising prices to provide for them in retirement. But rising prices do not necessarily mean houses are a great investment.

Ms. Odjick lives in a suburb of Ottawa, where the real estate market’s recent strength still leaves it way behind price gains seen in the Toronto and Vancouver areas. But her point is relevant to all markets where prices aren’t soaring, and probably to hot markets as well if you’re just now buying a first home and understand that continuous massive price gains are unlikely.

In terms of home upkeep costs, Ms. Odjick and her partner have had an easy time of it since they bought in the spring. But they’ve still had expenses that surprised them. “You can use all the calculators you want and you can plan as much as you want, but until you’re in it you really don’t know what the costs are going to be.”

One example is the $3,000 spent at IKEA to equip the house with furnishings as mundane as bathmats. Another was the cost of term life insurance, which, incidentally, is a smart purchase. Term life answers the question of how the mortgage gets paid if one partner in a home-owning couple dies.

Estimates of the cost of upkeep and maintenance on a home range between 1 and 3 per cent of the market value. Her house cost $425,000, which means that upkeep costs conservatively estimated at 1 per cent would come out to an average of $4,250 per year and a total $106,250 over 25 years. Ms. Odjick is too recent an owner to have much sense of these costs, but the housing inspector she used before buying warned her to expect to need a new roof in two or three years.

She and her partner don’t have grandiose plans to fix their place up right now, but she did mention that they are looking at having children. There will almost certainly be expenses associated with getting the baby’s room ready.

In her own analysis of housing costs, Ms. Odjick estimated the cost of property taxes at 1 per cent of a home’s value. That’s another $4,250 per year. This cost would add up to $106,250 over 25 years, and that’s without annual increases factored in.

The biggest cost homeowners face is mortgage payments. Ms. Odjick and her partner made a down payment of 10 per cent on their home and chose a two-year fixed-rate mortgage at 2.71 per cent. Assuming rates stay level and no prepayments are made, this would theoretically work out to a total of $542,122 in principal and interest over the 25-year amortization period.

But rates have crept higher since mid-summer and could increase further in the months ahead. In a post on home ownership on her Half Banked blog, Ms. Odjick said the idea of rates staying level “is bananas and will not happen.”

Let’s add up the costs of home ownership as likely to be experienced by Ms. Odjick over 25 years. There’s the $42,500 she and her partner put down to buy the house, the $106,250 cost for each of property taxes and upkeep/maintenance and $542,122 in mortgage principal and interest. Total: $797,122.

Now, let’s imagine the $425,000 house appreciates at 2.5 per cent annually for 25 years. That’s in line with reasonable expectations for inflation. The future price in this case would be $787,926, which means Ms. Odjick and her partner would have paid a bit more in costs than they get for selling their house in the end.

Houses can be sold tax-free if they’re a principal residence, so there is something to the house-as-an-investment argument. But the numbers comparing what you put in and what you take out over the long term don’t exactly scream “financial home run.”

Ms. Odjick’s fine with that, because buying her home was a lifestyle decision. “If we’ve lived here for 25 years, even if it does end up costing money, then it will have been a great place to live.”

Are you a Canadian family that has made a financial decision to remain lifelong renters? If you would like to share your story, please send us an email

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Should you buy in the city, suburbs or country?

Buying your first home brings major lifestyle changes – sometimes even a dramatic change in scenery. That’s because homeownership involves taking an honest look at your lifestyle, priorities and goals, and then investing hundreds of thousands of dollars in that vision. One of the first things to consider: should you buy where you rent, or house-hunt farther afield?

 

What’s right for you – the city, burbs or country?

CITY SLICKING

There’s a reason why urban real estate comes with a price premium: excellent public transit, plenty of arts and cultural attractions, lots of dining options, and easy access to everything from medical services to gyms and green space. Steady demand translates into a real estate investment that will grow as you build equity in your property.

PROS
  • Car-free living is a breeze (car share services are everywhere, so there’s no need to stress whenever you do require wheels)
  • Greater employment opportunities
  • Shorter commute to work and play
CONSIDERATIONS
  • Less home for the same price compared with suburbs and rural areas
  • Condos may be the only affordable option if you want to live right in the city core
  • Less privacy, thanks to closer quarters and higher population density

SUBURBAN DREAMS

Is it any wonder that generations of parents have flocked to the burbs to raise their families? It’s here that the much-desired single-family detached house rules, with big backyards (picket fence optional), good schools and a higher proportion of households with kids – perfect for impromptu street hockey or tag. While new communities may be low on shops and services, it only takes a few years of growth before cafés and sushi are just a short drive away!

PROS
  • Lower housing costs mean you get more home for your real estate dollar
  • Daycare costs are often lower than in the city
  • Quieter than the city, yet less remote than rural areas
CONSIDERATIONS
  • Longer commute and higher commuting costs (gas, parking, commuter trains and so on)
  • Some newer suburbs may not be as walkable compared with the city
  • Fewer entertainment, dining and grocery options nearby, aside from big-box chains

COUNTRY LIVING

Fresh, clean air, room to roam, no one to bug you about your bonfire or backyard hens – what could be better, right? Rural living has always appealed to self-reliant types, and in recent years it’s gotten a boost from millennials seeking a more affordable and lower-stress lifestyle (although overall, more people are leaving the country for the city). If you work from home, you can skip the commute and spend the extra time relaxing – or picking up a back-to-the-earth side gig to supplement your income.

PROS
  • Lower housing costs and more outdoor space for kids, pets and gardens
  • Easy access to recreational forests and lakes
  • Better air quality
CONSIDERATIONS
  • More susceptible to extreme weather: potential to be snowed in; power outages can be more frequent and last longer
  • Longer commutes to work, errands, entertainment and medical appointments
  • Harder to make friends in a small, tight-knit community (TIP: Make it easier by joining a volunteer committee!)

Source: homeownership.ca 

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The real estate math mistake we all make

real estate math

Most financial choices boil down to simple math. Add up the gains, subtract the costs, and you should get a number that helps you draw a conclusion. Those numbers are particularly useful when trying to make a major life decision, such as whether or not to sell the family home.

Given how hot big city markets like Toronto are these days, the math would certainly make a compelling case to sell. Yet according to the April sales data from the Toronto Real Estate Board, listings are down 27% year-over-year in the GTA. Despite brisk sales and skyrocketing prices, most homeowners living in semi-detached and detached homes are choosing to stay put. (A similar lack of inventory is plaguing Vancouver, Halifax, Ottawa and nearly every large city in Canada.)

TREB’s rationale for the dearth of listings? A widespread aversion to the high cost of land transfer. Other people have surmised that the scarcity is a symptom of our fear of paying a premium on the next property. After all, while you may sell high, you’re also forced to buy high—a proposition that leaves some feeling like prisoners to the status quo. But I think there’s another reason people aren’t selling as many homes these days, and it’s buried deep inside our brains. More precisely it has to do with how we process gains and losses.

According to Nobel-prize winning professor Daniel Kahneman, we’re hardwired to overvalue a loss and undervalue a gain. “The aggravation that one experiences in losing a sum of money appears to be greater than the pleasure associated with gaining the same amount,” is how he puts it.

To appreciate what Kahneman means, consider the case of Larry and Laura. Retired for three years, the Toronto couple have a comfortable debt-free life, funded by modest pensions, savings and government income programs. Thing is, they could have more money in the bank if they sold their home—let’s say they bought it 15 years ago for $250,000. But Larry and Laura can’t wrap their heads around selling and downsizing in such a crazy market, even though they could probably sell it for $750,000 or more.

The math says they’d be ahead by as much as half a million. But that calculation isn’t entirely accurate, at least not from an economist’s point of view. To understand how they’re undervaluing their gains, you have to consider the difference between sunk costs and opportunity costs. Sunk costs are anything spent that cannot be recovered. For Larry and Laura, that would mean the money they paid into the mortgage, the time and money it took to maintain their home and the emotional and mental energy they invested in raising a family in the house.

The opportunity cost, on the other hand, is what’s incurred from not taking the next best alternative. This is a fancy way of referring to all the ways Larry and Laura could be spending their time and money if it weren’t tied up in their family home.

Pretty straightforward, right? Only Larry and Laura aren’t as rational as they think. The idea of dismissing all the money, time and energy they poured into their family home feels like the emotional equivalent of losing their investment, a perceived loss that prompts them to overvalue their sunk costs. Economists would say this is irrational. They would explain our refusal to dismiss these irretrievable expenses as a “behavioural error” or an action that doesn’t conform to rational choice theory (a principle that assumes we always make the prudent and logical decision that provides us with the greatest benefit).

If Larry and Laura were truly rational, their real gain for selling their debt-free family home would be closer to $750,000 (the sale price minus transactional costs). Even if they chose to repurchase in the same market, it would likely be something smaller and less expensive; they’d still have money left in the bank to spend on travel, explore new hobbies or give to their kids and grandkids. So does that mean Larry and Laura should sell? Yeah, maybe. Since each person values a future gain slightly differently, it’s important to ask yourself the following questions:

1. What are the intangible and tangible sunk costs so far?

2. Am I willing to accept that these sunk costs will never be returned to me?

3. If so, can I see what I may be missing if I overweight costs that are irretrievable?

4. Finally, what would I actually gain if I were to sell and move now?

It’s totally understandable if you answer these questions and still choose to pass up the opportunity for a large financial gain. Sometimes the math used to determine a home’s value ignores the intangibles—factors that can outweigh even the most compelling balance sheet surplus. But going through an exercise like this will help anyone make a more informed, more rational decision. It’s better than feeling trapped in the status quo, a prisoner in a surprisingly expensive home.

 

Source: MoneySense.ca – by  

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Ten ways to make buying a fixer-upper worth it

Before buying a fixer-upper, consider these tips to ensure this option is right for you, and planned renovations prove profitable.

1. Consult a real estate agent to find out more about the neighbourhood

The real estate history (recent sales, pricing) of a neighbourhood will tell you if investing in a fixer-upper is worth your time and money. An agent can advise you on community news, including property development, environmental projects and other factors that will have positive and negative effects on your home’s resale value.

2. Schedule an extensive home inspection

Houses that need work may contain structural or cosmetic concerns, so it is important to know what elements need to be fixed in order to work those costs into your budget. Invisible upgrades (electrical, plumbing and heating) can be expensive fixes that don’t always increase a house’s value because they are naked to the eye of a potential homebuyer.

3. Request an estimate from a contractor

Based on an assessment by a certified contractor, determine how much money you’ll need to set aside for desired upgrades.

4. Know what you’re getting yourself into – both financially and personally

When buying any house, it is important to stay afloat and avoid swimming in debt. Fixer-uppers aren’t just hard on your wallet. Renovations can be disruptive, stressful and time-consuming, so it is imperative to have a solid financial plan in place and your family’s lifestyle taken into consideration prior to purchase.

5. Work out a schedule

Knowing if and when you plan to buy [?] your house can help you manage your renovation schedule and budget accordingly.

6. Know the law

Contact your local municipality office and request information on your city’s building permit laws before undergoing any renovations. Many large structural changes (additional storeys, extensions, decks) require a building permit. Future buyers might request proof of permits on condition of sale.

7. Don’t over-improve for the market

Once the renovations start rolling, you might not want them to stop. Designing your dream home is tempting, but only if the housing market will reimburse you for your efforts. Finishings (wood, stone, hardware) should be in line with houses in the neighbourhood.

8. Stretch your money

Forgo expensive wooden kitchen cabinets in lieu of higher quality countertops. Prime features of a home (luxury work surfaces, flooring, appliances, lighting) hold their value more than cosmetic fixes (paint, cupboards, carpet). Opt for energy efficient appliances that will save you money during residency and will be an attractive detail on resale.

9. Avoid over-customization

Remember that people’s tastes vary, so pull back on any customization that might discourage potential buyers.

10. Challenge yourself

Renovating is an excellent opportunity to try do-it-yourself projects. Simple changes like paint colour or swapping cabinet hardware are easier ways to be involved in your renovation and can also save you on labour costs.

Source: Homeownership.ca

 

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