Getting Ready to Sell-Before Listing

Before listing your home for sale, there are things you need to do to get ready.

1. When you decide to sell your property, it is important to check what impact this will have on your mortgage.

If you currently have a mortgage on your property, review the terms. You can bring a portable mortgage to another property if you plan to purchase a new property, rate may be varied though. If your current mortgage interest rate is very attractive, you may consider an assumable mortgage, it allows a buyer to take over your existing mortgage including the rate and term. If it’s an assumable mortgage, your lender will likely require the buyer to qualify under the terms and conditions of the existing mortgage before allowing them to assume the mortgage.

If you’re not porting the mortgage to a new property, and your current mortgage term isn’t finished, there will be a mortgage payout penalty. Penalties can be substantial. If you pay out your mortgage before finishing the term, ensure you have enough money to cover the payout penalty.

Always consult a professional financial advisor before making personal financial decisions.

2. Tax implications: 

In most cases, you won't pay tax on the money you make from selling your home if it was your principal residence every year since you bought it.

If your home was not your principal residence for every year that you owned it, you have to report the part of the capital gain on the property that relates to the years for which you did not designate the property as your principal residence.

If only a part of your home qualifies as your principal residence and you used the other part to earn or produce income, you have to split the selling price and the adjusted cost base between the part you used for your principal residence and the part you used for other purposes (for example, rental or business). You can do this by using square meters or the number of rooms, as long as the split is reasonable.

The CRA will consider the entire property to maintain its nature as a principal residence in spite of the fact that you have used it for income producing purposes when all of the following conditions are met:

  • The income producing use is ancillary to the main use of the property as a residence.
  • There is no structural change to the property.

  • No capital cost allowance is claimed on the property  

3. Important documents you may need

Once your home is on the market, gather any documents that will help you with the selling process, including:

  • Building permits for additions
  • Survey
  • property tax receipts
  • renovation contracts/receipts
  • transferable warranties
  • utility bills
  • rental contracts: Determine if you have any current contracts for home-related services, for example a home alarm system or rented furnace, air conditioner or hot water heater. For each contract, you need to think about the effect the contract will have on potential buyers. Can they assume your contract? Is the contract transferable in the event you buy and move to a new place? At the very least, you need to disclose to buyers the existence of and details for each contract.
  • Condominium Documents: Condominium documents relate to the operation of the condominium corporation. Buyers want to ensure the condominium corporation is financially stable, managed well, and properly maintained. Condominium documents include but are not limited to:
    • corporation bylaws
    • reserve fund study
    • reserve fund plan
    • financial statements (for reserve fund and operating fund)
    • board meeting minutes
    • annual general meeting minutes
    • certificate of insurance

If you don’t have the required documents, contact your condominium management company or contact someone on the condominium corporation’s Board of Directors. Or you can wait till you receive an offer, the offer normally conditional on you provide such document for the buyer’s lawyer to review.

4. Selling a rental property: Please read our full article : selling a rental property



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