Want to become a more informed seller? Here are five real estate myths debunked when it comes to selling a property in Canada.
#1: You are required to use a real estate agent when selling home.
There is no law or regulation that requires you to use a real estate agent during the purchase or sale of a home (or any other piece of real estate).
Truth be told, approximately 25% of Americans buy and sell a home without being represented by a real estate agent. (We don’t have similar statistics for Canadian transactions.) There are also a portion of buyers and sellers that use the services of unlicensed agents (a practice, I’m not keen on).
One big reason for not using a real estate agent is to save on paying commission costs. Keep in mind, though, these savings are typically only for the seller, who is responsible for both the buyer agent and the seller agent commissions. Also, going it alone, without an agent, doesn’t mean you avoid all fees. For a better understanding of what you’ll save and spend, consider our breakdown of costs in Going FSBO isn’t exactly free.
The best option is one where you’ve considered all the costs and all the work required to sell your home or buy a house. If you feel capable, and you have the time, going it alone is certainly a possibility and it could save you a bundle of money.
#2: The best tool to sell a home is a lawn sign and an open house.
According to statistics collected by national real estate associations in Canada and America, more than 90% of buyers start their search for a home online. So, any marketing that doesn’t include online presence is removing a major segment of the market.
One of the best online tools that you can use is the Multiple Listing Service (MLS)—a proprietary system that’s used as a repository of all homes available for sale to the public. In Canada, it’s the background program that feeds data to Realtor.ca. In the U.S., it feeds data to Zillow and other online listing services.
To use MLS in Canada, you must either pay a flat fee or hire a real estate agent who agrees to list your home on the MLS.
This doesn’t mean that a lawn sign and an open house aren’t valid marketing tools. They are. Both drum up interest in your property by giving neighbours, with friends and family who want to buy into the area, a chance to vet and promote your home.
#3: To have successful open house, all you need to do is tidy up.
While cleaning and staging are extremely important—as this is your home’s chance to make a good first impression—there are also important safety precautions to take. Make sure to secure all valuables. For instance, remove jewellery or jewellery boxes from cabinet tops (where they can be easily opened) and lock up important documents, such as passports or birth certificates, in cabinet safes or lockable drawers.
#4: You don’t need to report the sale of your home to the taxman.
Recent changes announced by the Federal Finance Minister Bill Morneau introduced tax changes that now require anyone who sells a property in Canada to report the sale of the property to the Canada Revenue Agency.
These new rule changes didn’t kill the capital gains tax exemption on the profit earned on the sale of a principal residence, but it now requires buyers to provide evidence (if asked) to prove that they are legally eligible for the exemption.
Starting with the 2016 tax year (forms that are filed in April 2017), any person who sells a property in Canada will be required to report basic information such as date of acquisition, date of sale, proceeds of disposition and a description of the property on their income tax and benefit return. This reporting requirement will now apply to every property sold in Canada, even if the entire gain is fully protected by the principal residence exemption.
For more on this, please read: 8 questions about the principal residence tax rules.
#5: When buying a home, using a mortgage, home insurance is optional.
If you have a mortgage, home insurance isn’t optional. Almost every lender in Canada will actually require borrowers to obtain a valid home insurance policy. The proof of this insurance must be submitted to your lender shortly after you sign your documents; failure to do so could prompt fines—as much as $200 per month—or even cancellation of the mortgage loan.