As of 2018, the median duration of homeownership in New York was 14.4 years. Because buying a house is one of the largest investments that most people make, it makes sense why some people stay put for the long haul before selling. Waiting to sell reduces the risk of local market swings and provides you potential gains when selling your home because of the amount of equity you’ve built up.
But sometimes plans change, life happens, and unexpected changes could mean that you need to sell your New York home much earlier than anticipated. Like the need to downsize or upsize, employment or financial changes might have you questioning a sale after one year or less in your new place.
If you find yourself considering this challenging decision, this guide is for you. Below we’ll take a look at the reasons why people need to sell, the cost of selling a house after a year in NY, and help you decide if it’s worthwhile.
Reasons Why You Might Sell A House After 1 Year
There could be several reasons what you may be considering selling your property so soon after purchasing and moving in. And honestly, you’re not alone! It’s not that uncommon for a home buyer to resell their residence within a year or less. In fact, it probably happens more often than people realize.
Let’s take a look at some common reasons and why someone might say “sell my house fast Brooklyn” after just one year rather than later.
The New York real estate market is constantly changing, so in some cases, if your local real estate market is hot, it could increase the value of your home in just a single year.
If you suddenly find yourself in a seller’s market, you might be tempted to take advantage of the situation and make a profit while you can. Also, selling for a profit and moving somewhere else may benefit you financially too.
However, you’ll need to calculate your estimated gains correctly. In addition, you’ll want to be prepared to pay commission fees, capital gains tax, and the standard closing costs which will cover more later on in this article.
You Can’t Afford to Keep Your Home
Perhaps your financial situation has changed, and you’re not able to keep up with your mortgage payments. Or your property taxes have increased to the point where owning the home is no longer financially viable. Adjustable-rate mortgages or other unforeseen circumstances like medical expenses, job loss, layoffs, divorce, and more can all put you in a lousy spot finically.
House Flipping has Forced Appreciation
Did you purchase a “fixer-upper” at value with the intent of renovating it to live in? Or perhaps this was a “starter home” or what was in your budget at the time.
If so, all that work updating the place may be the blank check you’ve been looking for. Many homeowners renovate and update their homes only to realize that they may be better off selling it for a profit and putting that extra money into their actual “New York dream home.”
In some cases, the home may be worth more to you if you were to sell it than hang on to it.
This is known in the world of real estate investing as “house flipping” (i.e., purchasing a home at a value, completing repairs and upgrades, and then reselling it at a higher price than the money invested).
Costs of Selling Your House After a Year in New York
For several reasons selling a house in less than a year can prove to be beneficial. However, the main challenges you’ll face when attempting to sell your NY home after just one year of ownership will be financial. Let’s take a look at some of the costs of selling your house in such a short time frame.
Property Selling Taxes
Many people focus on the sale price and realtor commissions when it comes to selling a house in New York. But what you’ll want to keep in mind are the taxes involved in a real estate transaction, especially when selling your home after a year of living there.
Of course, you’ll need to continue paying property taxes up until the day you close. So, if you haven’t paid your property taxes for the year then you’ll have to pay a prorated share when you officially sell. If you already paid the taxes for the entire year then the buyer should be required to reimburse you for the prorated share. Either way, property tax payments are usually arranged when you buy and sell a house and are placed into escrow. The property sale contract should clearly state the requirements – requiring each party to pay his or her prorated share of the tax.
But the most important tax you’ll want to be aware of when buying or selling a house in New York are capital gains taxes.
Capital Gains Tax
Both the state of New York and the federal government want their cut. By selling so soon after you bought a house, you might be subject to capital gains taxes.
The amount you need to pay in capital gains depends on various factors. This can include anything from the home’s condition to whether or not the buyer is a legal resident of the U.S.A.
Each can adjust the percentage owed. Fortunately, there are plenty of deductions available, including the fees paid for the loan origination, closing costs, and points paid back on a loan to get a lower interest rate on the mortgage.
Generally speaking, capital gains taxes are around 15% for U.S. residents living in New York. If the house is located within New York City, you have to account for another 10% in NYC taxes. However, there is a possibility that you qualify for an exemption.
For example, if you’re single and the property you’re selling has been your primary residence for two out of the last five years, the first $250,000 of profit from your home sale is entirely tax-free. If you’re married, this amount goes up to $500,000.
Unfortunately, if you’ve only been living in your house for one year, you won’t be able to benefit from these tax breaks.
However, unless you’ve made an excellent investment, it’s not likely that you’ll make a significant profit in such a short period of time. So with any luck, your tax burden will be minimal.
Think about it like this: if you’re not selling because of rapid market appreciation, then even if your property appreciated just a little bit in the short amount of time you’ve owned it, any profits will likely be swallowed up by the 6% commissions you have to give your realtor on closing day.
Ultimately, the rate at which your profits will be taxed will depend on your tax bracket, so it’s wise to consult with a tax specialist to make sure you’re budgeting correctly. If you’re in the highest bracket, you could pay up to 20% in taxes.
Closing Costs When Selling a House
When a home changes hands, there are closing costs involved. When you bought your property, you likely had to pay closing costs.
Usually, you’ll be able to earn back those costs in home equity over time, but if you’re selling your NY home after just a year, you might not have built up enough equity to cover the losses.
As a seller, you’ll also be responsible for some of the closing costs again, specifically your listing and buyer’s agents’ commissions, title transfer fee, prorated taxes, and utilities.
Paying two rounds of closing costs within a year of each other can be difficult for many homeowners.
The Break-Even Target
One way you can try to avoid some of these costs is by trying to break even. What we mean by that is pricing your home for an amount that will cover the home’s purchase price, interest paid on the mortgage, property taxes, hazard insurance, maintenance, improvements, closing costs, and real estate sales commissions. So although you won’t see any profit, you wouldn’t technically lose any money.
The only issue here is those costs you’re trying to cover could be hard for you to justify in your price. It’s usually public record to see what amount a house last sold for. So if you turn around and list your home a year later for $25,000 more, a buyer may see the value in improvements, but not the other extra expenses that you’re trying to break even on.
Is It Worthwhile to Sell a House After 1 Year in the First Place?
There are many reasons why an early sale might be necessary and even beneficial, but it’s important to figure out if it’s really worth it. Always weigh the pros and cons. For example, suppose this is helping you avoid foreclosure or filing bankruptcy. In that case, selling now is worth it compared to having either one of those on your credit history (foreclosure can be on your credit report for seven years and a bankruptcy seven to ten years).
As we’ve explained above, the worst part of selling a house after one year of ownership is all the costs associated with selling. It is difficult to save up for a downpayment, buy a house and then do it all over again in such a short amount of time. So if there is any way you can cut down on expenses, it would help tremendously.
And you actually can if you were to work with one of the companies that buy houses on Long Island. Leave The Key Homebuyers is a “We Buy Houses New York” company that purchases houses in as-is condition, requires no repairs or improvements, doesn’t charge realtor commissions, and helps pay closing costs. And since they are cash home buyers, they can close on your property in as little as 7-days or longer if needed. The benefits of accepting a cash offer are pretty evident and worth finding out about how it works.
So if you’re looking for ways to sell your house fast, contact Leave The Key Homebuyers.
Choosing to sell your home so soon after a purchase is a big decision that’s not to be taken lightly. Just make sure you make an informed decision, consult with a tax specialist and find ways to save where you can. If saving on repairs, improvements, agent commissions, and closing costs sounds ideal, reach out to Leave The Key Homebuyers for a speedy stress-free home sale. They would be happy to make you a no-obligation cash offer for your house today!