You’ve just bought your dream home, but life throws you a curveball, forcing you to reconsider your living situation.
Whether it’s a job relocation, an unexpected financial shift, or a change in family dynamics, you might wonder how soon you can sell a house after buying it.
Selling quickly can be overwhelming and financially worrisome, raising questions about the consequences and optimal timing.
In this blog post, we’ll tackle the uncertainties surrounding early home sales, exploring the factors influencing your decision, potential costs, and strategies to minimize the financial impact.
With our guidance, you’ll be equipped to navigate this challenging situation and make the best choice for your future.
Can You Sell a House Immediately After Buying It?
Actually, it’s not uncommon for people to buy a house to sell it soon after.
If you’re a first-time home buyer, you probably expected to keep your home (and home loan) for a long time. But you could have discovered that you don’t have enough money for the necessary repairs, your house doesn’t fit your family, or you could flip it for extra cash.
Quite a few people make a business selling a home after they immediately buy it. House flippers may line up their next potential buyer within a few months. Wholesalers may go directly from transaction to transaction.
In most cases, you can sell a house as soon as you buy it. (The only exception is if you have an assumable mortgage, which is extraordinarily rare.)
What Are the Downsides to Selling a House Immediately?
While you can technically sell a house right after buying it, there are some downsides.
For one thing, it’s expensive to sell a house. In addition to the real estate agent’s commission (typically 5-6% of the sale price), you’ll have to spring for repairs and renovations. Just because something was missed on your inspection report doesn’t mean it will be missed on the new buyer’s report.
In addition, if you’re selling a house you just bought, you may not have built up any equity yet.
Equity is the portion of your home’s value that you own; it’s what’s left after you subtract your mortgage balance from your home’s appraised value. If you have no equity, you’ll have to bring money to closing to pay the mortgage loan in full.
Finally, selling a house shortly after buying is difficult on a practical level. Don’t forget the financial burden of packing and moving your belongings.
Will a Mortgage Lender Stop You From Selling Your House?
Mortgage lenders generally don’t mind if you sell your house as long as you pay off the loan in full.
Most mortgage contracts include a clause that allows the borrower to sell the property without penalty. However, there are a few exceptions. If you have a non-conventional mortgage (such as a mortgage with a private individual rather than a mortgage company), they may have clauses such as a first right to purchase back.
Note that your loan’s “payoff” amount may differ slightly from the loan you see on your statements. You will need to request a payoff amount from the lender; this is the full amount you will need to pay to the lender to resolve the mortgage.
Are There Penalties for Selling a House Early?
If you have a fixed-rate mortgage, there are no penalties for selling your house early. You’ve already paid for loan origination fees and so forth.
However, if you have an adjustable-rate mortgage (ARM), you may be charged a fee for prepaying the loan. This fee is typically 1-2% of the loan balance, but it can vary depending on your lender and contract.
Should You Sell Your House or Rent It?
If you’re considering selling your house soon after buying it, you may want to consider renting it out instead.
There are a few advantages to this:
- You won’t have to pay any real estate commissions when selling the property.
- You can deduct the cost of repairs and renovations from your taxes.
- You may qualify for a mortgage interest deduction if you rent the property.
- You’ll have someone else to help cover the mortgage payments.
Of course, there are also some disadvantages:
- Being a landlord can be time-consuming and stressful.
- You’ll be responsible for paying property taxes, insurance, and other expenses.
- You may have to deal with difficult tenants.
- You won’t be able to sell the property immediately if you need to.
If you’re unsure whether to sell or rent your property, consider talking to a real estate agent or financial advisor. They can help you weigh the pros and cons and make the best decision.
How Long Should You Wait Before Selling Your House?
There’s no hard and fast rule for how long you should wait before selling your house. Ultimately, it depends on your circumstances and financial goals.
Common knowledge claims you should wait 3 to 5 years before selling your house. Assuming that houses appreciate at 4% yearly, this would be enough to cover most of the raw costs of purchasing a house, such as the real estate fees.
However, this can differ significantly depending on the market.
What Happens If You Owe More on Your Home Than You Sell It For?
If you owe more on your home than you sell it for, you will be “underwater” on your mortgage. This means that you’ll have to bring money to the closing table to pay off the remaining balance of your loan.
For example, you owe $200,000 on your mortgage, but your home only sells for $180,000. You must bring $20,000 to the closing table to repay the loan.
If you don’t have the money to do this, you may be able to negotiate with your lender to do a short sale. This is where the lender agrees to accept less than the full amount owed on the loan.
A short sale can damage your credit, so it’s not a decision to be made lightly. You should speak to a financial advisor or housing counselor before making decisions.
Can You Get a Mortgage for a Different House Directly After Another Mortgage?
How soon after you’ve gotten one mortgage can you get another? It depends on your mortgage type and your lender’s policies. For example, you won’t be able to get another FHA loan. FHA loans are intended for first-time buyers of primary residences (or those who haven’t purchased another house recently).
The reality is that your credit score will likely go down during the purchase process, and you may not even qualify for another mortgage. Nothing functionally stops you from getting a mortgage loan after resolving a previous one; it’s just a matter of whether you qualify again.
Special Considerations with FHA Loans
If you have an FHA loan, there are some special rules to consider before selling your home. It’s not just about whether you’ll be able to get another FHA loan.
Most notably, if you sell your house within 90 days, the house cannot be purchased with an FHA loan. This could significantly reduce the number of people interested in your home.
The Practice of Flipping and Wholesaling
Fundamentally, buying and selling a house is the same as flipping or wholesaling. And many people make money doing this.
Flipping and wholesaling are two common terms you’ll hear in the real estate world. Flipping refers to purchasing a property, making repairs or renovations, and then selling it for a profit. Wholesaling is similar, but instead of selling the property, you sell the contract to another buyer.
Flipping and wholesaling can be profitable, but some risks are also to consider. For example, you could lose money if the repairs cost more than expected or the property doesn’t sell as quickly as you hoped.
Selling a House Early with a Bridge Loan
A bridge loan is a short-term loan used to “bridge” the gap between purchasing a property and long-term financing.
For example, let’s say you’re purchasing a new home before selling your old one. You may not have enough money for the down payment on the new home, so you take out a bridge loan to cover the difference.
Bridge loans are typically interest-only loans, which means you’ll only be required to pay the interest on the loan each month. The full loan balance will be due when you sell your old home or obtain other long-term financings.
Bridge loans can be a good option if you’re confident that you’ll be able to sell your old home quickly and for the right price. But they can also be risky because you could end up paying two mortgages if your old home doesn’t sell as planned.
Finally: Don’t Forget Your Taxes When Selling Your House Early
You may have to pay taxes if you sell your home for a profit. This is because profits from the sale of a primary residence are typically exempt from capital gains taxes.
However, if you sell your home before you’ve lived in it for at least two years, you may be subject to the capital gains tax. The capital gains tax is a tax on the profit from the sale of an asset, such as a stock or a house.
The capital gains tax rate is currently 20% for most taxpayers.
Selling your house before you’ve lived in it for at least two years could also trigger the alternative minimum tax (AMT). The AMT is a tax imposed on certain taxpayers with income from sources other than wages, salaries, and tips.
For example, if you sell your home for a profit and have stock gains or losses, you may be subject to the AMT. The AMT is complex, so it’s best to speak with a tax advisor if you may be subject to this tax.
Apart from practical considerations, tax considerations may be the most significant issue. Usually, when you sell a house you reside in, you don’t need to pay taxes on the gains.
You can sell your house right away. But should you?
It depends on your circumstances.
If you’re selling for financial reasons, be aware of the costs associated with selling and that you may not have any equity yet.
On the other hand, if you’re selling because you need to move, go ahead and put your house on the market. Just be prepared for the hassle of packing and moving.
Whatever your reasons for selling, consult a real estate agent to get the best advice for your situation. You may be selling at the wrong time or don’t need to.
Yes, you can sell your house right away. However, there may be some costs associated with selling, such as real estate commissions, that you will have to pay. In addition, if you’re selling a house you just bought, you may not have built up any equity yet. You might even owe more on the mortgage than the property is worth.
Yes, it’s OK to sell your house after one year. Most mortgage contracts include a clause that allows the borrower to sell the property without penalty. However, a few exceptions exist, such as if you have an assumable or reverse mortgage.
There’s no right or wrong answer to this question. Ultimately, it depends on your circumstances and financial goals. However, many believe you should wait at least 3 to 5 years before selling your house. This gives you time to build up equity and cover selling costs.
Yes, you can sell your house after one month. It’s disruptive but doable. Housing wholesalers do it all the time. But you will likely pay more than you were expecting in fees.