Once your purchase is complete, you can list your house for sale immediately. But is that really the best decision? Probably not. Why? You risk facing losses due to capital gains tax, mortgage penalties, zero-value appreciation, and the costs you incurred during the transaction. Although there are many sweet deals, such as meeting a cash home buyer, that may nudge you to resell a house you just bought, you should consider a few factors before closing that deal.
The Five-Year Rule
If you ask most real estate agents, they will tell you that homeowners won’t break even if they sell their home within five years of buying it. This is because when you factor in the costs they incurred during the transactions, improving the home, and how fast the housing market grows, you need to wait at least five years. It’s said rules are meant to be broken, and since selling a home isn’t always about profits, maybe we can make some exceptions.
But First, How Do You Weigh Your Options?
Some of the questions we recommend asking yourself first include:
- Will that sale be profitable enough to cover all the costs and charges you paid out of pocket when you bought that home?
- How much more would you make if you waited at least five years for the property to appreciate in value?
- Is it possible to rent out the property instead as you wait for the selling conditions to improve?
Well, as soon as you’ve closed the deal on it. However, you will most likely incur heavy financial losses. Why?
- For starters, you’ll likely have to pay penalties for any mortgages you took.
- Secondly, you’ll pay capital gains tax on any profit you make if you’ve not lived in that home for at least two years.
- Thirdly, selling a home comes with transaction costs and agent commission fees, which will reduce your profits.
But even with all these factors, several situations can make you decide to sell your home sooner than expected.
Common Reasons Why Homeowners Recently Purchased Properties
- Health Emergency: Sometimes, homeowners are forced to resell their homes to cover medical bills due to unexpected health complications.
- Job Relocation: Landing a new career opportunity can force you to move to a new state or country, meaning you just might have to sell sooner than you intended to.
- Birth or Death of a Family Member: Getting a newborn or losing someone close can make you want to move to a new place for a fresh start.
- An Uptake of the Housing Market Conditions: In some cases, the demand for homes may go up, and it may benefit you to sell quickly. For example, when big companies set up shops nearby or when you do significant renovations, it increases your home’s value significantly.
Conclusion
So, should you sell a recently purchased home? Yes, you can, but waiting a few years can increase the value of your home enough to cover all the costs you incurred when buying it. We could all also use some tax breaks on our books, so don’t let that chance pass you by. Remember that buyers may also be wary of someone trying to sell a recently bought home as they may harbor suspicions that there’s something wrong with it.
