Edwina Nearhood: What to do when your equity ATM is closed


The ATM of home equity is closed. Five years ago, we had record sales volumes at near record prices in the Peace River Regional District. Today, as those mortgages come up for renewal, there are some challenges.

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Over the past decade or two, residents have been depending on increasing values in their home to realize equity for other purchases or debt consolidation. We have an entire generation of adults that have never experienced a market adjustment quite like we are experiencing at this time.

For those people that choose mortgages with shorter terms and escalated payments, such as weekly, biweekly, etc., they may have opportunity to realize some equity. For those who choose mortgages with long terms and monthly payments, there is a strong probability that much of their equity may have been erased.

The saying goes, location, location, location. Buy a smaller, good home in a good neighbourhood, chances are you will hold value better in a declining market then buying an inferior home in an entry level neighbourhood.

Government policy, financial stress testing, oversupply of inventory as baby boomers retire and downsize, as well as economic climate are just a few of the opposing forces impacting current market values.

Market value is defined as: “The most probable price which a property should bring in a competitive and open market as of the specified date under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.”

Implicit in this definition are the consummation of a sale as of the specified date and the passing of title from seller to buyer under conditions whereby:

  • buyer and seller are typically motivated;
  • both parties are well informed or well advised, and acting in what they consider their best interests;
  • a reasonable time is allowed for exposure in the open market;
  • payment is made in terms of cash in Canadian dollars or in terms of financial arrangements comparable thereto.

“The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.” (The Appraisal Institute of Canada “Canadian Uniform Standards of Professional Appraisal Practice” 2018: 18.8.4ii, iv).

Today’s local market shows indication of declining values, increasing marketing periods as well as emotional pricing with a range far beyond reason. There is evidence of homes selling by very motivated purchasers. There continues to be evidence of foreclosure competition.

When values are considered, the active listings are also a consideration in the selection of the final estimate of value. What a property sold for in 2014-15 is most often higher than what it would sell for today. High vacancy rates heavily impact entry level housing that requires renovations and upgrades as it is nearing the end of its economic life. There is evidence of these older homes selling, however, they tend to sell at quite a discount and then extensive renovations completed including mechanicals, foundation, windows, doors, siding, roof, and cosmetic interior.

What to do when the ATM of equity is closed? Start financial literacy training. Renovate your existing home. Find the importance in the small things like health and well-being, friends, family and community. The finger always points back to us. We have the control to make the choices to spend wisely or overspend beyond our needs. Go back to building strong foundations and health roots. 

Edwina Nearhood is a lifelong resident of Fort St. John. Her 30-year experience in the appraisal industry offers a unique lens on the challenges associated with the economic forces impacting real estate and the community.

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