Can I sell a house I just bought?
It’s not a silly question. In fact, new homeowners ask it more often than you’d think. Though real estate is typically a long-term investment, several valid reasons exist for wanting to sell your property directly after purchasing it.
A home sale within a year or two of its purchase isn’t what most experts recommend, and there are risks to be aware of. But there are also advantages.
Below, we discuss everything you need to know about selling a home you just bought. So, before you put a for sale sign in your yard, read on.
Can I Sell a House I Just Bought?
Technically speaking, the day you close your home purchase, you can turn around and sell it. No laws or regulations prevent you from selling a house you just bought.
However, most homeowners try to avoid selling a home they purchased in the last year or two. And industry experts recommend following the five-year rule, meaning you should stay in your home for at least five years before you list it.
Selling a home you just purchased often means you won’t make a profit and might not even manage to break even. So, selling in a short amount of time isn’t normally a good financial decision.
Why You Might Want to Sell a House Just After Buying It
All of that said, there are several reasons why you might want to sell your home directly after purchase. Here are just a few of them:
Sometimes circumstances change, and often these circumstances are outside of your control. For example, a health emergency or the death of a family member could force you to make choices you didn’t expect to make. You might need a new home closer to medical care or family support.
Positive changes could lead you to need a new home too. Job relocation or a growing family are good reasons to call a moving company.
Sometimes homeowners misjudge the amount their new home will cost. Mortgage payments and home maintenance expenses can quickly add up. As a result, you might need to sell your home immediately if you can’t afford it.
It’s rare, but sometimes, in a competitive seller’s market, a potential buyer might approach you with an offer too good to refuse. An incredible offer is more likely if you’ve made some renovations since purchasing your property or if you’re in a uniquely desirable neighborhood.
Even with lots of research, assessing a neighborhood before you’ve lived in it can be difficult. If you realize the community isn’t what you thought it would be or find it degrading quickly, you might want to get out before things worsen. Otherwise, you could take a bigger loss on your home’s sale later.
Disadvantages of Selling a House Soon After Buying It
Even if you’re selling the home you bought for a good reason, you should know the potential consequences.
Selling your home isn’t free. There are closing costs to consider. These include:
- Title Insurance
- Transfer Tax
- Escrow Fees
- HOA Fees
- Attorney’s FeProrated Property Taxes
- Real estate agent commissions
Altogether, these costs typically range between 8 and 10% of the sale price.
You might be able to save a little bit if you’re selling a house “by owner.” Or you can look for a cash offer to help avoid closing costs. The cash offer process on a house is typically simplified since you won’t have to deal with the buyer’s mortgage lender.
Normally, the equity you have in your home covers the seller’s closing costs. However, if you’ve only lived in your home briefly, you might not have much equity built up. So, you’ll have to pay for these costs out of pocket.
Capital Gains Tax
If your home is your primary residence, and you’ve been there for two years or more, you can exempt up to $250,000 ($500,000 for couples) in profits from capital gains. That means you avoid paying a capital gains tax when you sell your house.
However, if you’re selling your home less than two years after purchase, this exemption won’t apply. Capital gains tax rates depend on your income as well as other factors. The exact amount of time you’ve spent in your home will matter. If you’ve been in your home for less than one year, the capital gains tax rate can be as high as 37%.
If you’re selling your home because of a sudden, unforeseen circumstance, though, you should speak to a tax professional before you worry too much about the capital gains tax. There are exemptions for major unforeseen circumstances, like a medical issue or death.
Mortgage Prepayment Penalties
When a lender issues a mortgage, they expect to receive interest payments for years to come, thanks to 15 or 30-year terms on most mortgages.
That’s why, in some cases, mortgage companies charge a prepayment penalty. The penalty can range between 2 and 5% of your remaining loan balance.
A Likely Loss
Significant housing market fluctuations aren’t common. So, if you recently purchased your home, it’s unlikely the market value has gone up significantly. Given that you haven’t had time to build much home equity either, you’re likely to sell your home at a loss.
Moving Expenses and Stress
Selling your home means moving, and that brings more expenses and stress. Even if you’re selling your home for a good reason, like a better job or growing a family, that much change at once can be hard to handle.
Plus, moving isn’t free. You may have to pay for boxes, a moving company, and fuel to reach your destination. All of those expenses add up fast!
What Is Equity and How Does It Work?
Many of the disadvantages of selling a home immediately come down to equity. But, for many, equity is a confusing concept. Let’s try to clear it up.
Equity is the value and ownership you have in your home. You can calculate it by subtracting any outstanding loans or mortgages from your home’s current market price.
When you have significant equity built in your home, it acts as a profitable investment. So, when you sell, you’ll make a profit. When you don’t have much equity, though, selling can lead to a loss.
If you made a low down payment and your home’s market value didn’t increase significantly since you purchased it, you may not have enough equity to cover selling costs. So, you’ll end up paying to sell your home.
Advantages of Selling a House Straight After Buying It
There are significant downsides to selling a home within a year of purchasing it, but there are some advantages too.
Avoid Living In a Home You Hate
If you have buyer’s remorse after purchasing your home because it isn’t what you want or need, selling it might be the right decision. You shouldn’t live in a home you can’t stand. If remodeling isn’t an option, selling it might be.
Find a Home That Fits Your Family
If your family is growing faster than you imagined or if another situation changes, your home may not work. For example, maybe you’re welcoming a newborn, or perhaps your job is now remote, and you need an office space. In any case, if your home doesn’t fit your needs, it might be worth selling.
Renovate and Flip
If you purchased a fixer-upper you planned to renovate, you might decide to sell once the remodel is complete. Sometimes the renovations will translate to a higher property value, and you may want to take advantage of it.
Find a More Suitable Location
Maybe a 30-minute commute didn’t seem like a big deal when you purchased your home, but now it does. Or, perhaps a recent natural disaster, like a tornado or flood, felt too close for comfort. Moving right away could positively impact your day-to-day life and state of mind.
Taking Advantage of the Market
In rare cases, there might be a major market fluctuation that you want to take advantage of. Market conditions don’t usually change that fast, but if the value of your home suddenly increases for any reason, you might want to take advantage of it. An experienced realtor can give you a market analysis and advise on whether selling is a good idea or not.
So, can I sell a house I just bought?
The answer is yes. A change in your personal or financial situation could lead you to need to sell a home fast. To do that without the hassle and expense of real estate commissions and extra fees, you need a cash home buyer.
If you’re in the New York area, reach out. We’re cash home buyers in New York that purchase homes in “as-is” conditions. We buy houses NYC residents love. So, if you need to sell a house fast in Long Island, New York City, or any surrounding area, give us a call!