How soon can you sell a house after buying it?

Woman moves after selling a home she just bought

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Buying a home is a big investment, and usually, the last thing on your mind right after closing day is when you will sell your house. But one of the benefits of homeownership is you can sell your home whenever you want. You don’t need to wait until the end of a lease term to move, and you can decide the right timeline for you.

But your home’s purchase price and the closing costs associated with the purchase are a significant cost, and you want to be sure you are getting the best return on that investment despite the selling costs.

So, whether you are planning to sell your property within less than a year after purchasing it or a few years after purchasing, take a closer look at the consequences of selling after a short period of ownership.

Common reasons homeowners sell sooner than later

Unless you’re a professional house flipper, you might not purchase a home with the immediate intention of selling it for a profit. However, life can be unpredictable, and even the best-laid plans don’t always work out. You might find yourself in a position where you need to sell your house soon after buying it.

Here are some of the most common reasons homeowners have to sell sooner:

Changes in the family

A divorce, a new baby on the way, or an elderly parent moving in are some reasons that may prompt you to sell your home. Because of these changes, the home that you bought may no longer be suitable, and you may have to buy a new house that is more accommodating.

Job relocation

If you or a household member get a new job or a work transfer, selling your home and moving might be best. It may not be worth it to maintain two properties if you’re only living in one most of the time.

Though you may initially lose money in the resale, overall it may be the most intelligent financial decision to sell your house and use your equity towards a down payment and closing costs for a home closer to your job.

Maintenance and upkeep costs are too high

Some homeowners don’t want to deal with the hassle or cost of home maintenance. Landscaping, HOA fees, insurance payments, and energy costs are just some expenses homeowners are responsible for on top of their monthly payment.

Maybe you opted for a fixer-upper that seemed like a good deal initially instead of the new development home, but now you face significant renovations that you can no longer afford, or maybe you simply do not want to deal with it.

If the cost of upkeep on your home is too high, you might choose to sell and use that money to buy a new home that is more low-maintenance.

Underemployment

Losing a job or having your working hours decreased can be a big financial strain on homeowners. This can make it difficult to afford the monthly mortgage payments on your home, which might force you to sell the property before defaulting on your loan.

Death in the family

If someone in your immediate family passes away, and you cannot afford the costs of maintaining the home, you might have to sell the home that they owned. This is usually because the death results in unexpected expenses, such as funeral costs.

Medical emergency

Unfortunately, some people need to sell their home soon after buying it due to a health emergency. It can be because of the financial toll of having to pay medical bills or because the style or layout of the home no longer fits your needs anymore.

Money-related costs

Some of these costs are being unable to afford mortgage payments, overspending on the home’s price, and not having enough money left over after buying a home. If you find yourself in this situation, you might need to sell your home to get out from under the debt.

Being in high demand

If home values in your neighborhood shot up unexpectedly soon after your purchase, you can take advantage of the high buyer demand in your local market to get a good return on your investment.

Speak to a local real estate agent to get a comparative market analysis to find out how much your home has increased in value and decide if

Unforeseen situations

Lastly, unforeseen normal circumstances can arise that might force you to sell your home soon after buying it. These can include a natural disaster damaging your home or a family member passing away and leaving you the property.

Sometimes, if buyers are not prepared for homeownership and feel pressure to settle on a home because of a strong seller’s market, buyer’s remorse can push you to sell prematurely.

How soon after buying a house can you sell it?

Most homeowners are often curious about how soon they can sell a house after buying it. Fortunately, you can sell anytime, and one of the best times to sell your home is when it makes financial sense for you to do so.

What is your breakeven point?

When considering a sale, you’ll want to calculate your breakeven point to know if you now is the right time to sell. Your breakeven point is the point at which you will recoup all the money you spent when you first bought your home.

The simplest way of doing this is to take the current market value of your home and subtract how much you owe on your mortgage’s balance, how much you paid towards your down payment and closing costs, and what your estimated selling expenses will be.

If this number is positive, then you are at your breakeven point. If it is negative, then you may want to wait until you have more equity in your home or home values improve.

The best time to sell your house after buying

As a general rule of thumb, to avoid losing money on your home’s resale, you should wait three to five years before selling a house to minimize capital gains taxes and maximize the return on your investment.

Waiting at least a year allows you to build some significant equity in your home while gaining appreciation on your home value. And waiting at least two years to sell a primary residence allows you to take advantage of the long-term capital gains tax exemption.

What are the consequences or penalties for selling a home recently after purchase?

Though you may have no other option than to sell your home soon after purchasing it, you’ll want to consider any of the repercussions that may come with the home’s resale.

These are some of the consequences or penalties associated with selling a home recently after purchase:

Financial setback

To most, buying a home is their biggest financial investment. Saving a large amount of money for a down payment and closing costs takes years, and your loan options are generally long-term commitments of 10, 15 or 30 years.

Losing money on your most valuable asset is not ideal, but it can happen if you don’t sell your house for more than your remaining loan balance in addition to all the costs associated with your initial purchase and your current home sale.

Crunch the numbers before making your decision so you can make a smart financial decision that works best for you.

Emotional distress

Selling a home is stressful. And selling your home soon after purchasing it can feel like a failure, but it is important to remember that your home is a financial investment, and you should make decisions about it logically.

Short-term capital gains tax

Short-term capital gains tax takes effect when you sell an asset for more than you paid for it within one year. The government charges capital gains tax at a higher rate because they are considered more speculative in nature.

So, if you don’t want to pay a higher rate of capital gains taxes, it is best to hold on to the property for at least a year.

Long-term capital gains taxes

Long-term capital gains tax is charged when you sell an asset for more than you paid for it after a year. These types of investments are viewed as less speculative, so they are taxed at a lower rate.

The primary residence status gives sellers an exemption from capital gains taxes on the first $250,000 of profit if they are single or $500,000 of profit if married and filing jointly. So it is essential to take this into consideration before selling your home.

A tax professional can help you understand the tax implications of selling your home and advise you on the best course of action.

Prepayment penalty

Though uncommon, some banks have mortgage prepayment penalties that discourage homeowners from making extra payments towards their mortgage principal or remaining loan balance. Sometimes there is also a stipulation that homeowners cannot sell a house within a certain amount of time after purchase.

For a lender, a premature sale means they will lose the profit they would have made on your interest payments throughout the course of the loan. To minimize this loss, a mortgage prepayment penalty may charge you a percentage of your owed interest or your remaining balance.

Read your loan documents carefully or speak to your loan officer to see if you will be required to pay any prepayment penalties.

Negative buyer perception

When you sell a home soon after buying it, the buyer may think something is wrong with the property. This could make it challenging to find a buyer willing to buy your home at fair market value and can affect your home sale profits.

If you decide to sell soon after purchasing, be prepared to address these concerns head-on and reassure potential buyers.

Conclusion

Selling a home is a big decision and one that should not be taken lightly. Everyone’s situation is different, so if you are still unsure if now is the right time for you to sell your home, it is always best to consult with a local real estate agent who can help advise you on the best course of action and to see what options are available to you.

Author

Cristina Morizio

Long Island real estate agent Cristina Morizo
As an experienced REALTOR® and Long Island native, I know the ins and outs of the real estate market. I help home buyers, sellers, investors and homeowners navigate and negotiate. Questions? Ready to buy or sell? Let’s talk!

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