I Just Bought a Home and Want To Sell It — The Realities of Turning Over Real Estate Too Quickly
It’s hard to imagine a more dreadful feeling than when you realize your need to sell the home you recently bought.
After all the stress, excitement, and logistics of buying your house, it’s almost overwhelming to think you will have to go through it all again in order to sell the home and relocate.
If you think it will be complicated, you are correct. But it may be feasible. Nevertheless, you need to be aware of certain things before you consider whether selling your house would be a wise move.
In this article, we discuss the factors that will play into your decision followed by brief instructions about how to go about selling your newly bought home.
Table of Contents
- How Soon Can You Move After Buying a House?
- Reasons You Might Want To Move After Buying a House
- How To Sell a Home You Just Bought
- Contact PEGGY HOAG REAL ESTATE When You’re Ready to Sell in Oregon or Washington
How Soon Can You Move After Buying a House?
Whether and when you can move will be determined by your ability to incur the costs associated with selling early. The following scenarios will help you visualize what selling after different time periods might look like.
Selling Within a Year
Selling within a year is generally a loss for the seller unless the market is booming, as in 2021, when house prices went up 17.8%.
Not only can you lose part of your down payment if you sell too quickly, but you will also have to pay a short-term capital gains tax, if the value increased, which is 15-20% of the proceeds of the sale. For a $400K home, that would be $60-80K.
There may also be a mortgage prepayment penalty, the details of which are found in the prepayment penalty clause of the mortgage contract. This penalty is 2-5% of the remaining loan balance. Say you’ve paid $38K (a $20K down payment plus 12 months of mortgage payments) on the $400K home. In that case, the mortgage penalty could cost $6,840-$17,100. The good news is most mortgages do not have prepayment penalties, but some do, so be certain to check, to avoid an additional unexpected expense.
To break even or make a profit in this case, the market value of the house would have to be significantly higher than your costs to sell. Some factors that could increase your home’s value include:
- Good location
- Age and condition of your home
- Supply and demand
- Updates and upgrades to your home
- Comparable properties nearby
- The health of the economy
- Walkability score
- Size and usable space of your home
- Generational needs
Selling After Three Years
The mortgage prepayment penalty may apply until you have owned the home for five years, but the short-term capital gains tax will not be charged if you sell after two years.
Keep in mind that you will also have to pay closing costs, which may be about $26,600 for the seller of a $400K house in Oregon.
Selling After Five Years
Five years is considered the point at which homeowners who wish to sell will no longer be at risk of losing money on their investment. After this point, there are no mortgage prepayment penalties or short-term capital gain taxes associated with selling.
More specifically, if you’re selling a primary residence as a couple, you have $500K in capital gains tax-free, as long as you have lived in the residence for two out of the last five years. If you’re selling an investment property, you have to do a 1031 exchange and have equal or greater debt and an equal or greater price.
Closing costs would be the main concern, plus several fees associated with preparing the house for sale:
- Staging fees and any expenses to prepare the home for showings
- Realtor commissions
- Seller concessions
- Inspection and repair fees
- Moving and relocation costs
- Closing costs for the home you’re moving to
It typically takes about 5 years for the house’s appreciation to cover the above costs.
In recent years, growth in the market value of homes has been unprecedented. But profits aren’t the only reason people need to sell, so if you really must sell, it’s not always best to wait five years. Everyone’s decision is personal.
Reasons You Might Want To Move After Buying a House
Your Finances Have Changed
If your finances have changed due to job loss or a promotion, you may need or desire to move soon after buying a home.
You’re Relocating for Work
Relocating for work may be necessary if your company asks you to relocate out of state or out of driving distance from work. Or perhaps you’ve gone fully remote and decided you no longer need to be in that location.
You Have a Health Emergency
If you or a loved one acquires an illness or requires a recovery period of indefinite duration, you may find it necessary to move to accommodate new needs that arise. Perhaps you need to live closer to family to get support, or you wish to be near the hospital to make periodic visits.
Your Family Is Changing
Changes within the family structure may also necessitate a sudden move. These include:
- A divorce
- An unplanned pregnancy
- A child’s decision to attend college elsewhere
- A marriage
Your Property Value Has Increased
It can be hard to predict how your property value might change. For instance, an unforeseen effect of the coronavirus pandemic was that housing prices increased at unprecedented rates.
On the other hand, you might foresee that your property value will decrease if you notice that your neighborhood is beginning to decline.
You might want to sell if you have good reason to believe you can make a profit, even with possible penalties such as capital gains taxes.
How To Sell a Home You Just Bought
Speak With a CPA
Every situation is unique, making it hard to construct a perfect, by-the-book estimate of the financial details of your proposed sale. To get a true picture of what your expenses, losses, and gains might be, it’s best to have that conversation with an accountant.
Revisit Your Motivations
If it is determined that selling will cost you money, it might be time to reconsider whether it is really worth it. Consider these options:
- Can the property be rented out, such that it will bring in income until you decide to sell it (after you will no longer be subject to a penalty)? We can help with this also. To explore renting out your home for a period of time, contact HOAG PROPERTY MANAGEMENT. 503-906-1370
- Can it be refinanced?
Consult a Real Estate Professional
A real estate professional can run a market analysis to see how much the home has appreciated and give insights into the current market situation.
A professional can help answer questions such as: Can minor upgrades be done to improve the value of the home? Is it located in a highly sought-after area?
These are factors that a real estate professional will take into consideration before listing and marketing your home. They’ll also work on your behalf to negotiate the best possible sale price.
Contact PEGGY HOAG REAL ESTATE When You’re Ready To Sell in Oregon or Washington
If you’re wondering how soon you can move before buying a house, call PEGGY HOAG REAL ESTATE. Many years in real estate have given PEGGY HOAG REAL ESTATE a keen understanding of the market and the ability to offer sound advice about home sales. 503-906-1370