In the United States, the average homeowner stays in their homes for 13 years before selling. However, in some metro areas, the average homeownership duration can be as little as six years, while in others it can be as high as 18 years.
There are a number of benefits to buying a home versus renting one, including a pride of ownership, a sense of belonging to community, and a feeling of stability. On top of that, there can be financial benefits to ownership over renting, though the former does typically end up being more expensive than the latter.
People who are more nomadic or restless aren’t ideal homebuyers, as it is financially costly to buy and resell homes without allowing time to build equity, appreciate in value, and recoup the costs of buying.
That being said, life can throw us unexpected curveballs from time to time. If you recently purchased a house but your circumstances have changed, you might be wondering “how soon can you sell a house after buying it?” Let’s take a look at what you need to know so you can make an informed decision about selling your home.
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How soon can you sell a house after buying it?
You are free to sell your home at any point after the closing. That being said, doing so isn’t necessarily without consequences.
Many of the costs of selling your home soon after purchasing it are quantifiable. These include closing costs, capital gains taxes, real estate agent commissions, and more. We’ll take a look at the details of these costs later in this article.
On top of the potential financial consequences of the selling process for a home you just bought, there can also be an emotional toll in the hassle of dealing with different mortgage lenders.
How soon can you sell your home without losing money?
There are definitely financial risks to selling your home soon after buying, but that doesn’t mean you might not have good reason to. You paid closing costs during the buying process that you can’t recoup without the house appreciating in value or without gaining equity. You’ll also want to consider moving expenses and selling costs.
You’ll want to learn about the breakeven point before you decide whether or not to sell. The breakeven point is the moment when you can expect to make back all of the money that you spent on the purchase of the property. In a typical market, you’ll gain equity as you pay the mortgage and your home may appreciate, which can offset the cost of ownership as well as closing costs.
The main reasons for selling your home after recently purchasing it
There are a lot of different reasons that might compel you to put your house back on the market after you just bought it. These might be personal, financial, or professional reasons, some of which might be unplanned and unexpected.
Typically, most buyers expect to stay in the home they buy for at least eight years. However, things like marriage, childbirth, or retirement might instigate a need to sell your home and relocate. Some additional reasons that people might want to move sooner than expected include:
- Job relocation: If you get an offer you can’t refuse, you might find yourself considering relocating soon after buying your home
- Relationship change: If marriage or the dissolution of your marriage occurs shortly after buying a house, you might choose to sell your home
- Caretaker responsibilities: A sick child or an aging parent might prompt you to relocate
- Financial concerns: If your job status, income, or responsibilities have changed, you might need to sell your house to suit your new financial situation
- Unmet expectations: Sometimes you might find that your new home doesn’t suit your needs
- Neighborhood or maintenance issues: If neighborhood crime is on the rise or your home has more costly repairs than you expected, you might decide it’s better for you to move than to stick around
These are only some of the common reasons someone might sell their home soon after buying it. Only you can decide whether the reasons for leaving outweigh the potential consequences of selling so soon.
What to consider before selling a house you just bought
There are a number of different factors you’ll want to consider before you list your house for sale again. There’s no right or wrong answer here, but it’s worth understanding the costs of both the buying process and the selling process.
What is the Five-Year Rule”?
A general rule of thumb is that sellers won’t break even on the initial investment they made if they don’t stay in the home for at least five years. This rule derives from the notion that the transaction costs, home improvement costs, and appreciation timeline won’t be recouped until five years have passed.
However, this is, after all, just a general rule. For example, the current real estate market in some locations is a hot seller’s market, with rising home prices and competitive bidding wars. It’s certainly possible that your recently purchased home could turn you a profit in the right neighborhood even when you factor in all of the associated costs.
Appreciation
Real estate is a long-game investment rather than a get-quick-rich scheme. While the housing market has been crazy since the pandemic began, with historically low-interest rates, low inventory, and other factors leading prices to rise, in general housing values typically rise slowly over years.
How much your home appreciates has to do with a number of factors, including how much inventory there is and how much demand there is in your location.
Appreciation can be divided into natural and forced appreciation. Natural appreciation is what happens over time to the price of your home as governed by forces in the market. Forced appreciation is when you buy a property for less than its market value or remodel a house which can then be sold at a higher price tag.
You can learn more about how to increase your home value here.
Negative buyer perception
Buyers can see information on websites like Zillow about when the house was most recently purchased. The short time frame between the purchase and being put back up for sale can come off as a red flag to some people. It could lead homebuyers to think that the location might not be safe or that the house might have major issues.
However, this shouldn’t be a dealbreaker. You can use the listing description to describe the reasoning behind the quick flip, such as “seller must relocate.”
Mortgage prepayment penalties
Your mortgage might not have a prepayment penalty, but it’s definitely worth looking into if you’re going to sell a house you just bought. If you do have a prepayment penalty, you might be on the hook for a percentage of your remaining loan balance, a flat rate fee, or a percentage of owed interest.
Loan amortization
When you take out a mortgage, you are signing on for an amortized loan. This means that most of what you pay in the first couple of years will mostly go towards the interest payment rather than the principal balance. Basically, you likely don’t have much in the way of equity if you are planning on selling your house within the first few years of owning it.
Costs associated with the buying and selling process
Most people spend somewhere between 2 and 5% of the sales price of a home on closing costs. On top of that, many people use what savings they have to put towards a down payment. Unless your house has significantly appreciated in a short period of time, you likely won’t recoup what it cost you to buy the house.
There are costs associated with the selling process, too. These include things like loan origination and appraisal fees, escrow funds, insurance payments, and taxes. On top of that, there will be the realtors’ commission if you go that route.
Capital gains tax
If you experience fast appreciation and cash in on that, you’ll still have to deal with capital gains tax which can cut into your profits.
You’ll have to pay a short-term capital gains tax if you’re selling less than a year after buying. If you’re putting your house up for sale more than a year after buying but less than two years, you will have to pay a long-term tax rate on any profits. The rate will depend on your capital gains tax bracket.
You won’t have to pay any capital gains if you’ve lived in the home for at least two years for properties up to $250,000 for single people and $500,000 for married couples.
What to expect when selling in different timeframes
While everyone’s circumstance is going to be different, it can be a good idea to get a sense of what to expect when your selling shortly after buying. You might find that waiting for even a few more months might make the selling process more financially advantageous or at least less financially harmful for you.
Selling after six months
In general, people who are selling this quickly should anticipate losing some money. This means that unless you have an unavoidable or extremely compelling reason to sell, it might be best to wait a bit longer before selling.
Selling after one year
If your property is in a fast-growing market that has seen a lot of appreciation, the seller might be able to break even. In most places and in most situations, though, the seller will probably lose money.
Selling after two years
At this point, you can qualify for the capital gains exclusion, which is a plus. This means that you might be able to at least break even and in some circumstances, you might turn a profit. Make sure that you consult with a tax professional or your real estate agent in order to learn whether or not you are eligible to receive the exclusion.
Signs that it’s time to sell your house
As you can see, there can definitely be some consequences to selling your house soon after you buy it. However, everything in life is a matter of weighing out the pros and the cons, the risks and the rewards. You might find that it is worth it for you to list your house right after buying even knowing that you might lose some money.
Some signs that it might be time for you to sell a house even if you recently bought it include:
- You have significant equity in the home through a large down payment, home improvements, purchasing a foreclosed or short sale property, or through other means that allows you to turn a profit
- It’s a seller’s market and you’ll be able to break even or turn a profit on your home quickly
- You have the cash to take care of the closing costs and other costs, allowing you to weather the storm if you don’t quite breakeven
Ultimately, whether or not you sell your house soon after buying it is your own decision. However, understanding the different factors that can influence whether or not it’s a boom or a bust for you is essential to help you plan out your financial future.
Are you thinking about selling your home?
The answer to “how soon can you sell a house after buying it?” is fairly simple. However, the considerations that can help guide your decision can be quite complex. While it is usually financially advantageous to live in a home for several years before selling it, financial factors aren’t the only thing that guides where you need or want to live.
Selling your house to a cash buyer rather than selling it on the open market means you don’t have to invest time and money into fixing up your house, and it eliminates having to deal with realtor commissions and closing costs.
If you’re interested in selling your home in a hassle-free, headache-free way, you can get a free, no-obligation offer from a trusted iBuyer today.
