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Buying a dream house is a big decision so homeowners intend to live there for a long time. While you are probably planning to live there forever, circumstances may lead you to sell the house early. Here, the first question that comes to mind is how soon can you sell your house after buying it. In this article, we will guide you to the answer to your question. It also includes the consequences of selling your house early after buying it.
Reasons Why People May Sell Their Houses Early
If homeowners are not flippers, they do not think about selling their houses soon after buying. However, there can be exceptions. Sudden changes in job location, and health emergencies can force people to change their residence. The other circumstances include:
Sudden Rise in Property Value
Your home’s equity value may rise and you can utilize the opportunity to earn quick profit. However, you have to consider the drawbacks of selling the house earlier than expected. This analysis will help you to make the best decision.
Buyers’ Remorse
The location or the neighborhood may not be the right fit for you or your family. This can turn your excitement into regret once you move in. However, one should wait and analyze the market situation before deciding to sell the house.
Financial Hardship
Due to health emergencies, you may need to sell your house early to pay medical bills. You may also lose your job all of a sudden and need to cover up costs. Moreover, Paying the mortgage payment, property taxes, and maintenance costs can be too much to handle.
Change in Job Location
If you get a lucrative job opportunity, you may need to relocate. Your current job location may shift as well and so you may need to sell your house to commute easily.
Can You Sell Your House Within Two Years of Buying It?
You can sell your house anytime you want after closing the deal. There is no fixed rule regarding the timeline of selling your house. Just be prepared for the capital gains tax and the financial hurdles that will come along with it.
What is the Five-Year Rule?
According to industry experts, you should keep your house for at least five years. This time is adequate to build up your equity value and earn profit from selling the house. Also, to meet the breakeven point, five years is generally thought to be adequate.
Cons of Selling Your House Within Two Years
Even though you have the freedom to sell your home whenever you want, there are some negative consequences of it. Consider the following drawbacks before deciding to sell your house early:
Capital Gain Tax Implications
Capital gain tax is one of the biggest expenses a homeowner must carry if they earn profit from equity. According to the two-year rule, your home has to be your primary residence for two years to get tax exemption. This condition allows individuals to get an exemption of up to $2,50,000 of their capital gain. Married couples can get an exemption of up to $5,00,000. It is wise to consult tax professionals to avoid tax penalties.
Mortgage Prepayment Penalties
If you finance from lenders, you may have to pay a prepayment penalty for selling your house early. Lenders usually charge 2% to 5% of the remaining loan. This is because they miss out on the interest payment they could receive if you haven’t sold the house. Before taking a loan to buy a house, you should make sure there is no such clause in the contract.
Selling Costs
You have to consider the moving and closing expenses while deciding to sell your house. Moving again within a short time can be expensive. For sellers, the closing cost can be 8% to 10% of the selling price. The sellers’ expenses are-
- Agents commission
- Capital gain tax
- Attorney’s fees
- Transfer tax
- Insurance fee
- HOA fee
Negative Perception in the Market
Selling your home early creates a negative perception among the potential buyers. They may think there is something wrong with the house. You may not get the desired price even if there is increasing market demand. Real estate agents can help you solve this issue if you are trying to sell early. They can give reassurance to potential buyers through appropriate marketing strategies.
Can You Sell Your House Soon Without Losing Money?
It is possible to sell your house early without losing money. Your property value must be appreciated to recoup the expenses. You have to calculate the breakeven point and decide the best-selling price.
How to Calculate the Breakeven for Your Home
Calculate the closing costs, total monthly mortgage payment, property tax, maintenance cost, agent fees, and selling expenses. Then determine your equity gain value and tax exemptions (if availed). If your selling price recoups all of your expenses and justifies your equity gain, you can find a breakeven point. To select an appropriate price, you need to research the area’s market demand and evaluate the condition of your house.
Strategies to Selling Home Soon After Buying It
Planning strategies can reduce the risk of financial loss. The strategies include:
Wait to Avoid Tax Penalty
First, you should wait for at least two years. By doing so, you can avail the facilities of tax exemption on capital gain. However, if you cannot wait for two years, you have to be prepared to pay the full amount of capital gain tax.
Find an Expert Real Estate Agent
You should consult with real estate agents to find out the right time to sell your house. Their research and expertise can guide you to find the perfect time when buyers have demand. This way you can maximize your profit from selling the house early.
Stage Your Home
Try to make the house appealing so that the potential buyers become fascinated. Selling your home early will put a negative perspective on the buyers. So, it is essential to renovate and decorate it properly to divert their attention. You can take professional help to stage the house.
Benefits of Selling Your Home Early
It is not always bad to sell your house earlier than expected. You can renovate the house and flip it within a short time if the market demand spikes up. Also, If you buy the home on sale during a low-demand period, you can sell it in a high-demand period.
In a Nutshell
There is no such law about how soon you can sell your house after purchasing it. But you have to consider the drawbacks of selling within two years of buying the house. If you have to sell it earlier, you have to find the best ways to mitigate the loss. Here, your solution can be taking assistance from a competent real estate agent. They will lead you to make the right decision according to their market research. Their expertise will provide you with the roadmap for selling your house and maximizing profit.
