Is it Worth it to Finish My Basement When Selling My Home in Ottawa?

The Ottawa real estate market is still hot. The October 2021 numbers are out and are showing us that there's a continued appetite for both freehold and condominium properties in Ottawa. In October 2021, there were 1,677 properties sold via the MLS this figure is down 21% from October 2020 when we saw 2,132 property sales.

Buyers are often competing to secure properties while sellers are trying to maximize their net earnings by listing and selling for as high as they can. The question I often get from sellers is "Is it worth it to finish my basement before I sell my home"? or "Should I do renovations before listing my home for sale"? Although the answers vary depending on the specific house what I normally remind them is that Ottawa's real estate market is for the most part in a seller's market. Since inventory is still low in most neighbourhoods. Finishing a basement prior to listing the home on the MLS is something one must think about and evaluate before jumping into renovations.

It's important to look at the house in question, study the neighbourhood and evaluate if spending money to renovate or finish the basement is a good idea. My main goal for these sellers is to see if every dollar spent on the renos would net a positive return. Essentially, if they spend $1 in renovations would they get $1 back at the time of the sale? On a larger scale if they spend $25,000 in finishing the basement will that translate into $25,000 or more in net income at the time of the sale?

If we look at the popular neighbourhood of Avalon East, Avalon West, and Notting Hill/Summerside in Orleans' a suburb of Ottawa. In the last 6 months, there were a total of 42 homes that were detached and sold without a finished basement. The average sold prices for these homes that had no finished basement was $780,064. They sold in an average of 14 days.

Looking at homes with a fully finished basement during the same time period, in the same 3 MLS districts of Orleans, the average sold price was $817,318 and the average days on the market was 15 days.

How much value will you gain?

We can clearly see finishing a basement in this area of Ottawa does add value to the home and therefore sellers can sell for a higher amount. Now, the difference in averages between homes with a finished basement vs those that did not have a finished basement is $37,254 which translates to an increase of roughly 4.7% in price.

Once I arrive at a similar figure for their neighbourhood we can then have a look at their current home and the current condition of the basement. We then look at what type of renovations could be brought to the home based on the recent sales of their neighbourhood. Those that are handy may choose to complete the work on their own others may have to hire contractors to complete the work. It's important for home sellers to evaluate the cost of the materials and their time if they choose to finish the basement on their own while others opting to get the work completed by contractors will need to review the quoted prices. 

Is it worth it?

If the cost of getting the basement finished is higher than the net benefit of having the work completed then it's not worth it to spend money to finish the basement before selling. 

Other than price, one must also evaluate the time it would take for the trades to complete the renovations of the basement based on their schedule and availability. Ottawa and many areas of Canada are seeing labor shortage and some disruption in the supply chain which makes finding trades and getting materials a bit more difficult even during this tail end of this global pandemic.

Are buyers looking for a finished basement?

Finally, another consideration that is not often talked about is although a newly finished basement does add value to a home the way it is finished also matters a lot. For example, you may think finishing a basement with a bedroom and family room may be what everyone wants when in reality that area may be best suited to basements with simply a family room and an additional bathroom. In simple terms, what you think is hot and trending may not be what the future buyer is looking for. 

If you want to discuss this topic some more please give me a call 613-889-7732 I'll be happy to chat with you and even have a look at your home to best advise your family. With more information and more data points, you'll be able to decide if it's worth it for you to finish your basement before selling your home here in Ottawa.