How to sell your parent’s home

Is your mother or father’s health declining? Do financial worries mean they need to dip into their home equity? Have they lost their partner and are feeling adrift? Perhaps they just want to try something new. Whatever the reason, the time may come for Mom or Dad to downsize and sell the family home. And that can be deeply emotional for everyone involved.

Here are a few tips to consider when you’re thinking of selling your aging parent’s home:

1. Meet with a real estate specialist

Meeting with a real estate professional can be a valuable step. A pro can estimate what the home is currently worth. Then, they can suggest ways to make it more attractive before listing it for sale. A realtor can also give you an up-to-date picture of local market conditions. The bidding wars and unconditional offers that made headlines in recent years have vanished in much of Canada. But the market may still be hot in your parent’s neighbourhood.

Just as you would with any home for sale, you’ll want to paint, clean and declutter. Hiring a home inspector is also a good idea, especially if it’s an older home. Realtors don’t typically suggest major renovations, but issues with things like wiring or plumbing may need addressing right away.

2. Keep an eye on the full financial picture

Work with your parents and their financial advisor to find out your parent’s total income, mortgage, taxes and investments.

Jayne-Ann Steele is a Toronto-based home and long-term care specialist. She says developing a financial plan ahead of time is an excellent idea. It can prompt you to arrange to handle your parent’s finances and health care, should that become necessary.

It can also help you decide the level of care they need, and what they can afford. Options could include living independently, in an assisted-living arrangement or even in long-term care.

3. Bring in a downsizing specialist

Natalie Lewin, a Toronto-based realtor, recommends you start by creating an inventory of all household items and furnishings. Decide what will move with your parent, and what you’ll give away or throw out.

Clutter is something Lewin encounters often. “There are lots of memories attached to material things,” she says. “It can be difficult for people to let go.”

Be sure to think about the available space at the new location when deciding what stays and goes. And make sure everyone (including your siblings, if that’s appropriate) is a part of this process, Lewin adds.

Some people, like Jackie, hire a downsizing specialist. Her mother died in 2023, at age 99, after living in the same house for 67 years. Her father had died two years earlier. The five siblings didn’t want to see the house go out of the family, Jackie says. “But it needed too much work to keep, so we decided to sell. Nobody was willing to take on the responsibility of keeping it.”

But first, they had to clean it out. A lot of belongings can accumulate in 67 years. “They weren’t hoarders by any means,” Jackie says. “But there was so much stuff.”

Jackie and her siblings identified what they wanted to keep. Then they hired a local expert to assess the value of everything else. She priced what was worth selling, staged it and sold the lot. Anything not sold went to refugee families. Her fee: 30% of the proceeds.

They received and accepted a good offer within a month. “There were no surprises, because we had everything in place,” Jackie recalls.

4. Remember to deal with emotions

Moving can be emotional at any age. But leaving the comfort of a long-loved family home can bring on feelings of displacement, depression and anxiety.

Think about the deep emotional attachment your parent has to the old home and the old neighbourhood, says Steele. It’s important to encourage your mother or father to say goodbye.

You may feel emotional, too. “It was hard at first,” says Jackie. “Then you start to distance yourself. Once it was empty, it wasn’t our home anymore.”

5. Keep the lines of communication open

“Having a high level of patience and understanding is the best advice I can give,” says Steele. That means having open, candid conversations. It means sometimes asking the hard questions. And it means respecting the answers. Do you know what your parent hopes for? Does your parent know what you hope for? Talking about money may not be easy, but it will help prevent misunderstandings, faulty assumptions and hurt feelings.

Why you may want to wait before selling

There’s another consideration: Should you sell your parent’s home while they’re still alive? Or should you wait until after they die? Here’s why it’s worth thinking about.

You may want to wait because:

• Your parent doesn’t need the money.
• The home only needs some small modifications to make it accessible.
• You want to keep the family home in the family.

Or it may be a simple emotional decision: Your parent can’t bear to leave the home they love. (Or you can’t bear to uproot them.) This is where keeping those lines of communication open is vital.

Jackie and her siblings knew what their mother wanted. “She didn’t want to move. We had too much respect for her to try to persuade her otherwise,” she says.

Another reason to wait: You may be less sentimental about the home than your parent. That means you might set a more realistic listing price or be more likely to accept a reasonable offer.

These are all good reasons to wait.

Why you may want to sell sooner than later

Tax considerations might give you a good reason to sell. If the home sells for more than it cost, your parent won’t have to pay tax on the difference. That’s because Canadians don’t pay capital gains tax when they sell their principal residence. We also don’t pay inheritance tax. But if you already own a home, and you inherit, then sell your parent’s home, then you could be taxed. Why? The government will treat it as a secondary residence, and tax the appreciated value as a capital gain. And you’ll pay whether you keep the home or decide to sell it.

If your parent bought years ago, you could face a massive tax bill. How much?

Suppose your parents bought their home in 1980. The average price that year in Canada was $76,214. In 2023, the average was an eye-popping $716,044, according to the Canadian Real Estate Association. Currently, the government taxes 50% of an asset’s appreciated value as a capital gain. If you already own a home, the government could tax your inherited home as a secondary residence. Using these average figures, you’d be looking at paying tax on nearly $320,000.

Remember: your tax rate rises with each segment of your income. In this case, you could lose nearly half of that amount to the government. What if you inherit the home but don’t actually sell it? Money to pay the tax bill still has to come from somewhere.

In today’s real estate market, inheriting your parent’s home may be your best chance to become a homeowner yourself. Statistics Canada says millennial children of homeowners are twice as likely as children of non-homeowners to own homes themselves. The reasons commonly mentioned are:

• Higher family wealth tends to enable higher education levels and so, higher incomes.
• Wealthier parents can more easily help with a down payment.

But another reason may become evident over time. If you’re a millennial, your homeowning parents may be around for a few more years yet. But if they haven’t sold their home before they die, you may inherit it. It may not be exactly what you want, or where you want. But if you haven’t yet been able to buy a home yourself, it will get you into the market.

Can you afford to inherit your parent’s home?

Even with no tax, though, there may still be heavy bills to pay. The home may need extensive renovations, for example. Or it may still carry a mortgage, a balance on a home equity line of credit, or other debt. And you may not be able to (or want to) assume or clear that debt.

Unless you inherit a lot of cash along with the house, paying those bills could be challenging. But wise estate planning by your parent can ensure you have the cash on hand. For example, suppose your parent has some money they don’t expect to need, that they can invest. They could buy a life insurance policy payable to you. With investment growth, the eventual, tax-free payout could be a lot more than what they paid for the policy. (This strategy can also help keep a family cottage in the family.) In the meantime, wise investing on your part can also help, especially if you’re not carrying a heavy mortgage.