02/25/2015
PROPERTY VALUE
Dear Denyse,
I bought my home in Montreal 2 and half years ago. Since we have lived here, we have invested over $50,000 in improvements and renovations including a new roof, a new kitchen & main bathroom, as well as new hardwood on the upper floor, and some other small things. Recently, due to a job opportunity, we made the decision to relocate and have begun the initial stages of interviewing agents, and having our home evaluated. The problem is that when you factor in the price we paid for the home, and add the cost of the renovations we put into the house, the asking prices I am being suggested to list at do not add up. I feel like we should ask for more. Can you explain to me how this works in a way that makes sense? Thank you.
-Bewildered in Montreal.
Dear Bewildered,
Thank you for bringing up a common frustration faced by many homeowners who are dealing with a life change of some sort that involves the sale of a home sooner than they had originally planned.
A property evaluation in terms of current market value for sale is based on recent sales of comparable (similar) properties in a given area, such as on neighboring streets, or in a particular zone of a neighborhood. What you paid for the house 2 and a half years ago, may not reflect the current sales in the area, and while improvements & updates do add value, it is the market that dictates how much that value is, and that does not automatically reflect the dollar amount you invested.
Markets improve or decrease in varying degrees depending on many factors. For example, in the last year and a half in the Montreal market we have faced challenges such as political uncertainty, as well as lowered confidence in consumer borrowing, which have both affected supply and demand, and in consequence the property values in the area, and that is on the wider scale. In your particular area there may be any number of factors affecting the markets values. It is hard to pinpoint an exact cause without knowing more details.
That being said, the bottom line is that if, for example you are selling a 3 bedroom cottage that is updated and relatively turnkey, and your neighbor just sold his 3 bedroom cottage with similar renovations, chances are good that you can expect to sell for a relatively similar price.
The good news is that you are selling a property that you made more valuable by investing in its upkeep and improvement. When you made those investments you probably had intended to live in the house longer that the 2 and a half years you mentioned. Had you enjoyed the house for 5, 7 even 10 years or more, chances are good that you would have made other improvements along the way and the market would have provided you with a stronger, more positive gain, but in your case, that is not in the cards. So, assuming you are bound to the relocation, and other options besides selling are not available to you, you have no choice but to push forward.
All is not lost however. The first step is to find yourself a professional Real Estate Broker with whom you feel comfortable communicating. Together, based on the recent sales in your area, come up with a fair and realistic price that will enable you to sell quickly and efficiently. Once you have your property sold, you have now become a true buyer in terms of the purchase of your next property. You will be armed with the confidence of knowing your property is sold, and knowing exactly what you can afford, and this will give you immense power as a buyer, as well as prove hugely positive for you when it comes to negotiating on the purchase of your next property.
So, what you may perceive as having been lost on one end may actually be gained back on the other.
Wishing you a positive Real Estate experience and all the best.
