Only very few people buy a home thinking about selling it later. Typically, most sellers report having lived in their home for several years before listing it for sale. Nevertheless, situations can arise that might force you to sell your home soon after purchasing it. During such scenarios, you might wonder, “can I sell a home I just bought?”
The simple answer is that you could sell your home the day after you buy it. However, it might not be a smart financial move. Selling your home soon after buying it can cause significant financial losses in the form of mortgage prepayment penalties, capital gain taxes, etc.
So, instead of thinking about selling a home you just purchased, you should think about how soon you can sell the home you just purchased without losing money.
Why Do Homeowners Sell a Home Soon After Buying It?
While professional home flippers buy and sell homes frequently, most people don’t buy a home with plans to sell it within a year or two. Nonetheless, several reasons could push people to do so:
- Job Relocation – People often must relocate to shorten their commute when they land a new career opportunity.
- Changes To Family Size – Children leaving for college, a new baby, or a death of a family member might make people want to upsize or downsize their property.
- Financial Challenges – Sudden changes affecting the financial situation, like a family member losing their job, an increase in property tax, etc., can make people no longer able to afford the mortgage.
- Health Emergency – People might urgently want to free up equity to pay medical bills or relocate closer to a family member suffering from a medical emergency.
- Seller’s Market – Perhaps, the homebuyer might have gained equity quickly and want to take advantage of the hot seller’s market to make a profit.
What Costs Are Associated with Selling A House Soon After Buying It?
Unless you have lived in the house for at least two years, there are good chances that you will lose money while selling it. Here are three potential losses you might sustain.
- Capital Gains Taxes
Homeowners who sell their home within two years are taxed on the first $250,000 they earn from the sale. Couples are subject to pay taxes on the first $500,000. Typically, the capital gain tax ranges around 15%. This accounts for a significant amount that could quickly nullify any profit you make on your home sale.
If you have lived in the house for two years, it is considered your primary residence, and you will be exempt from the capital gains tax when you sell. Other exceptions to capital gains taxes include moving because of a disaster, unemployment, etc. Consult a real estate agent or tax professional to learn more about capital gains taxes.
- Mortgage Prepayment Penalty
Unless you were a cash buyer, you might have to pay prepayment penalty charges for selling your home. The exact amount and the period after which you can sell your home without paying the charges will depend on your lender. Most lenders include prepayment penalty clauses in their mortgages because premature sales mean they lose monthly interest payments.
How Soon Can Homeowners Sell Their Home Without Losing Money?
When you purchased your home, you paid closing costs, moving charges, HOA fees, repairs expenses, etc. If you choose to sell your home soon, chances are that you won’t be able to regain these expenses. So, if you don’t want to sustain such losses, and it isn’t extremely important that you sell your home now, your best bet is to wait until you hit the breakeven point.
The breakeven point is a specific time in the future when you can sell your home and regain all the money you spend on buying it. This includes your down payment, closing costs, monthly mortgage payments, insurance, taxes, etc.
As you might already know, housing prices keep fluctuating. Since they are on the rise now, there is a good chance that the house you bought now will have a higher value in the future. Generally, most homeowners must wait for at least two years before they reach the breakeven point.
A crucial factor to consider when calculating your breakeven point is determining a realistic price for your home. You will have to perform a comparative market analysis and home evaluation. While you know how much money you spend on purchasing your home, the demand in your area might have changed with time. Meaning, you might be able to ask for a profitable sale price or sell your home for a lower price.
When And Why Should Homeowners Sell Fast?
Sometimes, it makes sense to sell your home before you hit the breakeven point:
- You renovated the home within a short period which significantly increased its resale value.
- The demand for houses in your neighborhood shot up unexpectedly due to the booming job market, new development, etc., contributing to a rise in home values.
- You purchased your home because you landed a great deal as part of a short sale or foreclosure. Hence, you can sell it soon to turn a profit.
These circumstances can’t be planned for. Hence, if you are looking to sell a home that you just purchased, it is ideal to keep an eye on the home value in your neighborhood.
Final Thoughts
At the end of the day, how soon you can sell a home you just bought without sustaining losses depends on several factors. You should be mindful of all the costs you incurred during the purchase, use them to calculate your breakeven point, and keep an eye on your local housing market. If all these tasks sound overwhelming, an easier option is to work with a real estate agent.
Find a good real estate agent in your area who is familiar with cases like yours. They will help you reach the right decision, and during instances when an immediate house sale is inevitable, they will help you land the best deals without sustaining much loss.
Contact Jackie Ruden Realty Team
Give us a call today at to set up a time to discuss your current and future real estate goals in regards to buying a home or buying a property in trust. We look forward to working with you to make your goals a reality.
