When asking the question: How soon after buying a house can I sell it? The answer is simple: You can sell your house right away! There is no law stopping you from selling your home the very next day. However there are financial factors to consider and reasons why staying in your home for a year or two might be best.
While selling a house right away might not seem like a smart move to some, the reality is, if a lucrative job opportunity comes up or health emergencies and other unplanned-for life disruptions occur, you can find yourself seriously considering selling your house years before you would have wanted to consider it. If you find yourself in a situation such as this what you need to know is how soon can you sell your house without losing a ton of money.
When Can I Sell My House and Not Lose Money?
If you’ve lived in the home for less than a year then on average you won’t be breaking even or making a profit if you sell the home. It’s just not a financially smart move to sell your home in less than one year because you won’t have enough time to recoup any costs associated with buying then selling as well as moving costs.
Unless life changes dictate that you have to sell your home (no matter the financial loss) then it’s smart to do the math and wait until you can break even on your investment. At the break even point you would be able to sell your home and walk away without having lost any money on the house by purchasing it in the first place.
The money you would need to recoup would include your down payment, closing costs, the amount of the monthly mortgage payments you’ve made, the property taxes you’ve paid and the amount of mortgage insurance you’ve paid.
If you do the math then on average you’ll need to be in your home for at least two years for the equity in the home to have built up enough that you could then sell your home and break even. The exception to the two-year rule would be if you made significant renovations on your home in a short amount of time that increased the home value dramatically. You could also break even sooner (or even make a profit) if the homes in your neighborhood go up in value quickly based on the market and if you got a super deal on your home in the first place (like in a short sale) and now you can sell it for more.
Other Factors To Consider When Selling a House Quickly
Breaking even isn’t the only financial reason you might want to delay selling your house right away, you could also have to deal with:
Capital Gains Taxes – There are several legal ways to work around having to pay capital gains taxes, but just to be sure you don’t get heavily taxed for the sale of your home you’ll want to confer with a tax specialist before you decided to sell so they can instruct you on your unique situation.
Mortgage Prepayment Penalty- Did your loan include a prepayment penalty for selling your home before a set amount of time had passed? This is called a mortgage prepayment penalty and though they aren’t common–FHA loans never have them, for example– you want to check your loan paperwork and make sure that’s not a potential problem for you.
Also, when a home is quickly re-listed it can send up warning flags for potential buyers. The perceived value of the home can be affected if you are trying to sell after having not owned the home for long. While you can work around this bias it’s hard to say how much this will affect you financially.
Calculate Costs When Selling Your Home Quickly
If you find yourself in a situation where you need to sell quickly and possibly even take a financial loss, then it’s important to have an idea of what all the approximate costs will be so you know if you can afford to move.
Step One
Find out how much you can expect your home to sell for. This could mean hiring an appraiser or having your realtor run comps to give you an idea of the fair market value for your home.
Step Two
Subtract the closing costs from your potential sell price. You can anticipate buyer closing costs to cover 2-5% of your home purchase price. It is common for buyers to ask the seller to cover the closing costs so keep this in mind. Seller closing costs can be 8-10% of the sale price, with the majority being paid out in commissions to the agents but also includes title insurance, escrow fees, any taxes, HOA fees or attorney fees.
Step Three
Subtract the amount of money you might have already put into the house (in repairs or upgrades) as well as the amount you might need to put into the home in order to sell quickly. Do you need to pay for painting, staging, photography or lawn care? What will you spend out-of-pocket to prepare your home to sell.
Step Four
Finally, subtract the mortgage payoff amount from the potential sale price. If you haven’t lived in the home long then you probably won’t have lowered your loan principle very much at all.
With these numbers calculated you can have a fair idea of how much it will cost you to sell your home after living in it for a short amount of time.
The reality is, selling a house soon after buying it can be very expensive, but you do have less-expensive options! Gary with Gary Buys Houses will not require working with a realtor, seeing a staged home with professional photos or paying for expensive inspections. Save on all those extra fees and sell your house for cash with a quick closing time when you work with Gary. He is a trusted home buyer in the state of Utah and can help you sell fast for your situation without any drama or fuss. Contact Gary about purchasing your home today.