Are you considering selling your home and moving on? If so, you should be aware of some of the obstacles your potential buyers may be facing as they navigate today’s hectic and fast-changing market. In this post, we’ll address a few aspects of real estate that have changed over the last few years.
No matter what the market is doing, an accurate assessment of the value of your home is essential. Book your free home evaluation right here.
Stress Tests Are More Stringent
Even if interest rates are going down, it doesn’t necessarily make it easy for buyers to pass the dreaded stress test when applying for a mortgage. The stress test applies to insured mortgages – including those with more than 20 percent as a down payment. Financial institutions don’t qualify loans at the existing rate; they cushion it by a couple of percentage points to ensure the buyer can still afford their mortgage if rates increase.
How does this affect you as the seller? The stress test has an immediate impact because it affects how much a potential buyer will be able to qualify for. They, in turn, will be seeking to get the best value that they possibly can. It doesn’t mean that the right person won’t pay a fair value for your house. It does mean you may have to take extra care in preparing your home so that buyers can see themselves living there.
Your pricing is also a critical component of the sale. It always has been, but it is even more important when buyers are cautious. Again, it doesn’t mean undervaluing your property. It may seem counterintuitive, but a compelling price point could attract more attention and actually lead to a higher sale price in the end.
The stress test might also affect your next steps, especially if you plan to buy a new home after your transaction closes. Earning the highest possible price now could mean you need to borrow less, which minimizes the impact of the stress test on your purchase.
Are you selling a home to buy a new one? The resources below can help guide you along:
- Should I Buy or Sell First?
- What’s in Your Listing Agreement?
- Should You Sell Your House or Rent It?
Why Have a Stress Test?
Although the stress test may sound like bad news to both buyers and sellers, this rule is actually meant to stabilize the real estate market and avoid a crash in the future. After all, no one wants a repeat of 2008! Testing a buyer’s proposed borrowing against an elevated interest rate will help homeowners avoid overwhelming payments that they can’t afford.
Canadians already have a high amount of debt, and this safeguard will help ensure that borrowers are taking on a risk that they will be able to manage – even if mortgage rates increase.
Other Changes to Canada’s Housing Rules
In addition to the stress test, there are other new implementations for the mortgage industry. Years ago, the federal government eliminated 30-year amortization periods for high-ratio mortgages (loans where the buyer places a down payment of less than 20%). Again, the intent was to stabilize the market and prevent Canadians from being too overloaded with debt.
Since then, houses have become more unaffordable for first-time buyers. Beginning in 2024, 30-year mortgages are back even for buyers with lower down payments – with a few caveats.
- The buyer cannot have purchased a home before.
- The buyer must purchase a newly constructed property.
Longer mortgage terms come with numerous advantages and disadvantages for the buyer. Unfortunately, this rule doesn’t help you much when selling a resale property; it can be challenging to compete with new construction, especially in a softer market that favours buyers.
That said, newly-built homes aren’t for everyone. They can be more expensive than resale homes, which could negate any benefit from a lower payment with a longer mortgage. In addition, some people prefer an established neighbourhood and an existing house with character. The trick is to promote your listing in a way that attracts the most likely buyers.
Effective marketing and presentation are critical if you want to maximize your sale in today’s market. The posts below can help:
- Selling Your House in Hamilton? Here’s How to Make the Most of It
- The Power of Staging When Selling Your Home
- Minor Upgrades, Maximum Results
Woolcott Real Estate Is Here to Help!
Anything that makes buying more challenging will also affect you as a seller. Just remember that you don’t have to navigate this new reality alone. Your best bet when selling is to connect with a local real estate team who knows what people are looking for when buying a house today.
Do you want personalized guidance and support to get the best possible value when selling your house? We can help! Reach out to us right here or call 905-332-9223 to connect with an experienced real estate agent today.
