I know, I KNOW, it sounds crazy to sell our home before our new home is ready! We had a great many discussions before choosing to do this – there are lots of factors to consider, like timing and market trends. In fact, I think we’d started discussing our options for financing our new build even before we committed to the builder.
DISCLAIMER: Before I dig into this post, I should remind you that I am not a financial advisor and this article is not meant to give financial advice. This article is provided as an account of our choice to sell early and the factors that went into that decision. Please consider speaking to a financial professional to discuss your personal options for funding your new build.
The sale of our cottage was a strong kick-off to the funding process for building our new home. It allowed us to purchase the land and do the preparation work for the build. We were able to:
- Purchase the land
- Do some additional clearing
- Have the driveway improved/widened to get the house in
- Install the well and septic system
- Make the first big payment on the new build
- And we put some money into our RRSPs to offset the capital gains from the sale of the cottage.
Even with all of those tasks out of the way, we still had reserves, but not enough to complete the build without financing – which would have been a completely acceptable way to fund the remainder of our project. We wanted to see if there was a practical way to finish the project without debt or at least without complex financial gymnastics.
Weighing the Options
Our main target was to complete the building of our new home without having debt at the end. That means we had a budget estimating our costs and what we thought the sale of our home would provide. Our plan is for this home to be the place of our retirement and that means that some time in the near future, we will be transitioning from a working income to a retirement income. Through all of this, it’s important to us that we don’t end up diminishing our lifestyle for the sake of paying off debt when the time comes to stop working.
The two main financial scenarios we assessed were:
1. Finance the remainder of our new build using the equity in our current home through a Home Equity Line of Credit.
This would mean that we get to stay in the comfort of our current home until the spring after our Quality Home was completed. It would also give us time to move in rather than rushing to do it in one day in the middle of a Bruce Peninsula winter. These alone are big benefits for me since I seem to have less tolerance for rush and upheaval as I age.
The key financial benefit to this option is the seasonal increase of real estate traffic that spring typically brings. That seasonal upswing would, in theory, bring us more people interested in buying the house. We would potentially have more traffic through the house and likely a faster sale.
The down-sides of waiting to sell our home would be the financial burden of carrying the cost of two homes and not being able to predict the spring real estate market with any real certainty. While we have the means to carry the two properties for a short period, we didn’t cherish the idea of spending more money when we don’t really need to.
2. Sell our home early to have funding without debt and find temporary accommodations until the house is ready.
It seems strange to think that you could possibly save money by living in temporary accommodation. When we took into account the cost of interest on the debt we’d have to carry in Scenario 1 plus utilities, taxes and the like, saving money might actually be possible.
So, we tucked into researching to see what short term rent would cost in our area before we explored this idea any further! We soon discovered that there are Air BNB’s and other short term rental opportunities that may discount their rates for full month rentals. We found one in particular that would work nicely and the monthly rate was significantly discounted! I think there is a good chance that this scenario would only work if your timing is away from the peak tourist season in your area.
QUICK HINT … If renting short term accommodation for longer periods, check out possible tax savings for renting 30 days vs. 28 days! We discovered, by accident,that a 28 day rental was more expensive than a 30 day rental. Upon closer investigation we noticed that HST was removed on rentals 30 days or more! Who knew?!
Over dinner one evening, as we discussed our thought processes above, my sister and brother-in-law graciously offered to have us stay with them during our transition stage. Well, that certainly eased the weight of the decision – even with the “will we stay friends” thoughts that suddenly swirled around in my head.
To Sell Early or Wait – Our Thought Process
Knowing that we’d have to sell our home in the city at some point, we had been keeping a pretty close eye on the local real estate market. We started noticing that sales were taking a little longer and the asking vs. sale prices weren’t showing the gigantic positive gaps that they had been. Last year and even earlier this year homes had been selling for thousands over asking in our area as people seemed to be scrambling for homes. That trend was definitely slowing down and it started to feel like a risk to wait and see what the market would do in the spring.
Initially, our plan was to finance the new build and wait until spring to sell our current home. Then we did the math again, updating our calculations using the rising interest rates. The cost of interest, two sets of utilities and taxes for up to 5 months would have been in the 10’s of thousands. And if the sale takes longer than we hope … well, who knows how long we’d be carrying the cost of 2 properties?
We double checked our math again on the short term rental scenario too. It came out to thousands, but not 10’s of thousands.
We’re Selling Our Home in the City Early!
Like I mentioned before, this move is setting us up for retirement so any money we can avoid spending frivolously is in our favour. So, even though we’d have to pay to stay somewhere in the interim, it seemed like a safer route to take to sell early. So that’s just what we did!
Once again we were on the phone to our favourite Real Estate Agent, Terri Cardinal of Sutton Sound Realty to list our home in the city. After a short discussion and looking at comparables, we set – what we thought was – a fair price and made arrangements for pictures to be taken. Hopefully for one last time for a very long time, we followed all the best practices for preparing for the pictures, and for showing our home:
- We strictly edited our storage spaces, including clothing closets, and got everything into a rented storage unit. We got a large unit so we could fit our entire household in it after the sale.
- We cleaned … and cleaned … and cleaned some more.
- We did some final touch-ups from our recent painting and renovations.
- We removed all small decor items that would read as clutter in pictures.
On the day of the pictures, we even got the boat out of the garage to show off the space – even though “WOW you can fit a boat in here!” seemed like a perfectly acceptable way to show off a garage to me. We were determined to put our home’s best face forward to find its next owners quickly. I’ll admit though, I did have moments of melancholy while doing all this preparation work; this home had been my most favourite home yet.
As usual, with Terri’s expert guidance, and her photographer’s expert talent, our home hit the market to a flurry of activity. It didn’t take many showings before we had our first offer. Unfortunately that offer to purchase didn’t go through but it was soon followed by another one, and then another offer from the first people again! SOLD!
Where are we staying until our new home is ready?
Not only was the sale of our home quick, the closing date was much closer than we anticipated. Uh-ohhhh! And THEN … we received our HUG (Home Owner’s Ultimate Guarantee) move-in date from Quality Homes and that was about a month later than we were expecting. The change in date makes sense considering they give their employees two weeks off to enjoy the holidays with family and they have extra contingency for weather during winter builds. But that changes our stay with family from 2 months to 4! Uh-ohhhh!
Since we couldn’t in good conscience impose on my sister’s life for 4 months, we’re mixing it up! We’re staying with them from our sale closing date until the start of the new year. Then we’ll stay at that Air BNB until our new home is ready.
How do I feel about selling our home before our new build is ready?
I know that it was the best thing we could have done with the information we had at the time. Watching recent sales in our old neighbourhood slow down, even in the short month since we’ve sold, simply adds to my confidence in our choice. Sure, it’s unnerving not coming home to my own space but getting the chance to spend more time with my sister has been pretty cool. Plus, knowing that this transition time is temporary and for the greater good of getting into our beautiful new home without financial burdens makes it even more worthwhile.
Now, all I have to concentrate on is enjoying the new home building process!
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