It’s the age-old question – precisely how long must you wait before you can sell your condo? For Ontarians, the question lingers just as strongly, and there’s a lot of misunderstanding surrounding the issue. Selling your condo is a big deal, and it pays to know the ins and outs of such a transaction, before making a move.
However, the issue of when to sell your condo isn’t based on laws, but rather, a series of unwritten rules that are typical within the marketplace. Confused? Don’t be. Simply read on to learn a few tips and recommendations before deciding to put your house up for grabs.
SHOULD YOU, OR SHOULDN’T YOU?
In Ontario, there are no actual legal restrictions in place that govern how soon you can sell your house or condo after buying it. After all, it’s your property, and you can do with it whatever you’d like. However, just because you can sell your condo at any given moment does not mean that you should. In fact, doing so could prove more costly over time.
Bear in mind the fine details of your particular purchase. For example, if you have a mortgage on the condo, you may have to pay a prepayment penalty if you sell it too soon. This penalty is designed to compensate the lender for the interest they would have earned if you had kept the mortgage for its full term. If you sell too quickly, you could be legally on the hook to pay back a penalty percentage.
The penalty amount can vary depending on your mortgage agreement, and the terms of the mortgage. Certain mortgages include a fixed penalty that represents a percentage of the outstanding balance, while others have a sliding scale that decreases over time. Always check your contract to make sure of the details related to this penalty, or if they exist at all. You may also check with a real estate agent or a lawyer, both of whom may be better suited to look over your contract and inform you of the costs associated with selling too soon.
LONG TERM CONSIDERATIONS
There exists in real estate an unwritten policy commonly referred to as the “five year rule.” While there’s no actual legal binding associated with it, the five year rule is more of a warning for homeowners to keep their home for a minimum period of five years before selling. The biggest reason is that homeowners rarely recoup their transaction costs if they sell too fast. Instead, they are advised to live in, or at least maintain the property for five years in order to break even on the initial upfront costs.
Situations do occur where people wish to sell their houses or condos quicker, however. In those cases, it’s best to weigh the pros and cons before making your move. For instance, if the real estate market experiences a massive jump into super-hot territory, the option to sell is obvious, as you’ll make quite a hefty profit. However, it pays to know your next move after selling your condo. A hot market dictates that surrounding properties in other neighborhoods may be just as expensive, or more, in which case, you’ll have to decide whether the pros outweigh the cons. Ideally, you’ll want to move into a more desirable, or larger condo, instead of ending up with a similar property to the one you just sold.
A second reason for selling early could be due to a decline in the overall neighborhood, the local economy, or law and order. In these cases, the monetary value of a condo is nothing compared to you and your family’s safety and well-being, so you may wish to take your losses on the chin and start fresh somewhere else. Neighborhoods can start out well, but quickly decline due to bad governance and policies, a decimated local economy, or rising crime. If you’re starting to hate living in a particular neighborhood, the option to sell and move seems particularly attractive.
And of course, situations may arise when you or your spouse finds a job in another city, province, or country, and the time has come to pack up the U-Haul and migrate. Unless you wish to keep your condo and rent it out to tenants, family or friends, you’re going to want to sell in order to help pay the costs of your big move.
Selling your condo shortly after you’ve bought it is not as scary as you’d think, but it does take some forethought before you decide to go down that particular route. It’s not quite as easy as waiting for your condo’s valuation to climb over the course of a decade or two, but if you’re lucky, it could be a profitable move that allows you to accelerate your economic goals, or grab that property you’ve had your eyes on.
Before deciding to sell, it’s best to talk to the experts. Fine Homes Real Estate has helped many Ontario clients sell their houses and condos, and we know how market and economic factors can affect the final sale. Our job is to help you navigate this particularly tricky scenario while emerging with the most optimal outcome. If you’re ready to sell your home, give us a call!