Broker's Blog

Plumbing and Fixtures

There are several good reasons to make sure all of your plumbing and fixtures look good and are in good working order before putting your home up for sale. When potential buyers come to look at your home, they are likely to turn on faucets and flush toilets "just to see". This is no time to make a bad impression with grungy old fixtures, leaks or stained sinks.

Before showing your home, you should make sure that all faucets and knobs are clean and shiny. If needed, buy new ones. They don’t need to be expensive. An inexpensive but shiny and obviously brand new fixture will make a far better impression than an expensive but old and stained one.

Another good reason to look after these items before putting your home up for sale is the likelihood of a home inspection prior to closing. Most savvy buyers will insist on allowing an independent contractor to perform a home inspection before closing. The inspector will be checking for leaks, pressure and making sure any appliances included with the home are in good working order. If the inspector finds any problems in these areas, it could easily cause a delay in closing.

Which home improvements give the best payback?

If you’re thinking about remodelling your kitchen, or finishing your basement, you probably want to get your investment back when you sell your home. But when it comes to payback value of home improvements, some are definitely more profitable than others. As a general rule, kitchen and bathroom projects usually get a nice return on investment, typically 90% or more. Things like adding rooms or finishing basements tend to pay back the least. Finishing a basement usually returns less than 50%, so it’s not a project likely to show profit at selling time.

There are a number of factors that go into determining how well a project will pay back. Payback value depends a lot on the current market conditions in your area. If the market is hot and homes are selling fast, you can expect a higher payback value than you would get in a slow market.

The type of project you do and how it fits in with other homes in the area can have a big influence on payback too. If you put your money into the wrong type of improvement, you won’t get your money back. But if you're smart about what you do, you can make money. The payback will be better on improvements that are in demand and conform to neighborhood standards. Adding a second bathroom in a neighborhood where most homes have two bathrooms will give a high return on investment. Building a large addition that makes your home twice as big as the other homes on the block probably won’t pay back very well. Likewise, the popularity of a project will factor into how much it pays back. An improvement heavily customized to your wants and needs won’t pay back as well as something more common to other homes in the neighborhood.

Another factor to consider is the cost of the improvements. If you can do the work yourself, you can save significantly on the cost of the project and greatly improve the chances of getting a good return on the investment.

The list below is compiled from several published surveys and shows typical payback for some popular remodelling projects:

• Kitchen remodelling – 90%
• Add a bathroom – 90%
• Bathroom remodelling – 80%
• Install central heating – 90%
• Install central air – 75%
• Add a deck – 70%
• Replace windows – 70%
• Add a room – 55%
• Build a pool – 45%
• Finish a basement – 40%

Some retirees are faced with mounting debt and inadequate income. What options do these seniors have, especially if they have a mortgage on their home and their retirement income is too low to cover the mortgage payments and have enough left over to have some enjoyment in their golden years?

One option that you see promoted on television is the “reverse mortgage” which allows a homeowner to borrow against the equity they have built up in their home over the years. The loan is not due until the homeowner passes away or moves out of the home. If the homeowner dies, the heirs can pay off the debt by selling the house and any remaining equity goes to them. If at that time the loan balance is equal to or more than the value of the home, the repayment amount is limited to the home’s worth.

In order to be eligible for this loan, the borrower must be at least 62 years of age and have equity in the home. The reverse mortgage must be a first trust deed. Thus any existing loans would have to be paid off with separate funds or with the proceeds from the reverse mortgage. The amount that can be borrowed is based upon age, and the older the borrower, the greater amount that can be borrowed and the lower the interest rate. The loan amount will also depend on the value of the home, interest rates and the amount of equity built up.

The borrower has the option of taking the loan as a lump sum, a line of credit, or as fixed monthly payments. In addition, the money generally can be used for any purpose, without restrictions imposed.

One question that always comes up when discussing reverse mortgages is, when will the interest be deductible? When determining whether reverse mortgage interest is deductible, when it is deductible and by whom, these are factors to consider:

1. Interest (regardless of type) is not deductible until paid. A reverse mortgage loan is not required to be repaid as long as the borrower lives in the home. Therefore, the interest on a reverse mortgage is not deductible by anyone until the loan is paid off. 
    
2. Generally reverse mortgages are classified as equity loans and the deductible interest would be limited to the interest accrued on the first $100,000 of debt. There are exceptions where the reverse mortgage paid off an existing acquisition debt loan. Equity debt interest is not deductible by taxpayers subject to the alternative minimum tax (AMT).