How Soon Can You Sell A House After Buying It?

When most people purchase homes, they plan on staying in them for at least a few years. But what happens if you just bought a home and already need to sell? Life happens, and sometimes unexpected events can bring you right back to the closing table after just a few months.

But how soon after buying a house can you sell it? And will selling too early affect your sale price? Let’s take a look at some of the reasons you may want to sell a house quickly after purchase and the possible consequences on the sale and your finances.

Why Sell A Home Soon After Buying It?

One study by Rocket Homes^SM found that 56.8% of first-time home buyers are looking for a forever home instead of a starter home. But life doesn’t always go as planned. Homeowners often move much sooner for a variety of personal or market-based reasons.

Investors

One common reason a homeowner might sell their home quickly is to turn a profit. Investors and house flippers have been doing this for years. During a seller’s market especially, it can make a lot of sense to renovate a home and sell it for a profit even if the owner has only been in the house for a short amount of time.

Personal Reasons

A lot of the time, a homeowner’s decision to sell their house shortly after purchasing it has nothing to do with the housing market and centers around big life changes instead. A job relocation, divorce, financial hardship, having a baby or experiencing a medical emergency can sometimes make it necessary for homeowners to move quickly and, sometimes, without warning.

Market Forces

New homeowners may sell because their neighborhood is experiencing significant price increases or may be in decline.

In a seller’s market, there are more buyers than homes for sale, so if you’re in an attractive neighborhood at the right time, you may have an easier time selling the property at a higher price.

On the flip side, if your area is declining in value, it may be better to sell your home sooner rather than later to increase your chances of making maximum profit.

Buyer’s Remorse

Sometimes, a homeowner sells their home because they regret buying it in the first place. In a competitive real estate market, many first-time home buyers make many compromises to get the keys to a home. If they rushed into a decision, they might find their neighborhood isn’t a good fit for them, the house doesn’t suit their needs or they underestimated the costs of owning a home.

Can I Sell A House I Just Bought Without Losing Money?

Whatever their reason for parting with a house, once a homeowner has the title, if they want, they can sell their home the next day. While you can sell as soon as the title is in your hands, should you? The home buying and selling process doesn’t come without a price. Immediately turning around and selling might cost you more than you gain.

Before selling their house, a homeowner should consider whether they can recoup the price they paid for the home, the down payment, closing costs and the other expenses of buying and selling in a short time frame. Whether you can sell your home shortly after buying will depend on your financial circumstances and your ability to deal with all the potential additional costs involved with a sale.

Costs To Consider When Selling Your House Soon After Buying It

When you sell your house, you’re not just getting back more (or less) than you paid for it. The process includes many direct and indirect costs, which may impact your decision to sell.

The following are just a few costs of selling a house.

Buyer’s Closing Costs

When you bought your home, you likely paid 3% – 6% of the purchase price in closing costs. Because it’s fairly common for buyers to negotiate with sellers to have them cover their closing costs, this is a potential cost you should add to your budget as you prepare to sell your home.

Seller’s Closing Costs

Sellers pay closing costs, too. They typically range from 6% – 10% of the home’s sale price. Sellers usually pay the real estate commission for their agent and the buyer’s agent. Other costs may include:

• Buyer’s title insurance policy
• Escrow fees
• Transfer taxes and recording fees
• Prorated buyer property taxes
• Prorated HOA fees
• Seller’s attorney’s fees

You should also budget for moving costs, which can vary depending on how far you’re moving, the size of the home and the number of personal belongings you pack.

Seller Sales Prep Costs

When selling a home quickly, you must present your home at its best to counter any negative perceptions a buyer may have about a quick sale. You may need to spend money to stage or present the home to potential buyers, which can sometimes be quite costly.

Getting your home cleaned and decluttered may cost a few hundred dollars. Professional staging can cost up to $1,700 or more.

Mortgage Prepayment Penalty

When selling a home shortly after buying, you may pay a mortgage prepayment penalty depending on how soon you’re selling and the terms of your mortgage. Some lenders charge a prepayment penalty when you pay off some or all of your loan ahead of schedule.

The fee varies by lender and depends on the terms of your mortgage. You may pay anything from a certain number of months’ interest to a percentage of the remaining loan balance. If you’re working with our friends over at Rocket Mortgage^®, you won’t have to worry about prepayment penalties because they don’t charge them.

Capital Gains Taxes On The Sale

Sometimes, a real estate sale triggers capital gains tax. If you’ve had the property for less than a year and profit from its sale, it may qualify as a short-term gain. In which case, you may pay capital gains tax based on your tax bracket and home sale profit.

There are some exemptions, but generally, if you made a profit selling a home you lived in as your primary residence for less than 2 years, consecutively or nonconsecutively, you’ll pay capital gains tax.

But capital gains tax typically won’t apply to short-term sales in most cases because selling quickly usually doesn’t result in a sizable profit or sometimes any profit at all.

What Is The Break-Even Point?

The break-even point is the stage at which the cost of a transaction equals the amount earned from the sale. The time it takes to reach this point will vary depending on the home and the mortgage. To profit when selling, you must be beyond the break-even point.

This means that when you sell your home, you need to make enough profit to cover your seller costs and the cost of paying off your mortgage. If you don’t make enough money back on the sale, you may pay some costs out of pocket, losing money on the sale of your home.

To help lessen financial losses, try building equity in your home before selling. Unfortunately, this strategy isn’t always an option for sellers who must sell their homes quickly because of unforeseen circumstances.

The 5-Year Rule

When reselling your home, some real estate experts recommend the 5-year rule. It’s an unofficial rule that advises you to live in your house for at least 5 years before selling it to avoid losing money. Not everyone breaks even in 5 years, so the 5-year rule doesn’t always apply. But it’s generally a good guideline to follow.

This rule gives homeowners time to build equity, so they hopefully won’t pay thousands of dollars out of pocket to sell their house and can cover their closing costs.

Selling In An Unstable Market

Some homeowners break even in less than 5 years.

In a strong seller’s market, your home might appreciate faster than usual, especially if you live in a high-demand area. If your home’s value has drastically appreciated, you may be able to break even and sell in 2 or 3 years.

This type of rapid increase in value isn’t completely unheard of. House flippers commonly resell homes quickly for a profit, though they manufacture the increase in a property’s value by pouring a significant amount of money into repairs and renovations.

Show Me The Math: How To Calculate A Quick Relisting

Selling a home – whether you’ve owned it for decades or the ink has barely dried on your mortgage loan – is always a big decision. When relisting your home, you must establish your property’s fair market value (FMV). FMV is supposed to be a relatively accurate estimate. You can try a few strategies to determine FMV, including:

Performing a comparative market analysis of similar properties, or “comps,” in your area

Hiring an appraiser to determine the home’s approximate value

Calculating the price per square foot by looking at comparable properties

For help establishing the approximate value of your home, you can also use our home value calculator.

If you don’t know much about real estate in your area, consider working with a real estate agent. They usually have local knowledge and expertise and can help establish the market value of your home.

Calculating The Gains And Losses Of A Fast Sell

Once you know your home’s FMV, you can calculate your gains or losses with better accuracy. For our purposes, let’s say the market value of your home is $250,000, and you bought it for $225,000.

Add all the fees and seller closing costs you expect to pay to the price you paid for the property to set an asking price that lets you break even. In this case, we’ll say that would be $250,000, the same as its market value. If you found a buyer to purchase your home for $250,000, you wouldn’t lose money – but you wouldn’t turn a profit either.

This scenario assumes you have no equity in the house. Now let’s see how different it might look to sell, but this time, you’ve built a little bit of equity through making monthly mortgage payments.

Step 1: Subtract Closing Costs From The Market Value

To begin, subtract your closing costs from the home’s market value. Seller closing costs are typically 6% – 10% of a home’s sale price. So let’s say you’ll pay $25,000 in closing costs. Keep in mind that you may pay some costs in addition to your closing expenses on behalf of the buyer, such as the buyer’s agent commission.

$250,000 － $25,000 = $225,000

Step 2: Subtract Home Improvements And The Mortgage Payoff

Next, subtract home improvement costs (if you have them) and your mortgage payoff amount. Your mortgage payoff amount may differ from your loan balance if your lender charges early payoff penalties or fees. In this case, you built a little equity, and your mortgage payoff is $215,000.

$225,000 － $215,000 = $10,000

In this scenario, you would make a profit of $10,000 if you sold the home for $250,000. If the result you get for your home is a negative number, you won’t break even and will likely pay out of pocket when you sell your home.

Signs To Sell Your House Early

An early home sale may seem like a sure path to financial loss, but that isn’t always the case. After all, house flippers buy and sell homes quickly for a living. In some situations, selling a house early for a profit makes sense. In others, it makes sense to sell early to reduce losses.

Your Housing Market Is Hot

Market conditions can influence whether you should sell or wait. It may make sense to sell your home for a profit if there is an unusually high demand for properties in your neighborhood and the value of your home and surrounding properties has skyrocketed – especially if you want to move anyway.

If you’re selling early to turn a profit, don’t forget that you may pay capital gains tax if you’ve only been in your home for less than 2 years. And keep in mind the cost of the home you’d be moving to. Deciding to buy a home versus rent is a huge investment. Homeowners should make sure the house or rental they’re in is perfect for them and their finances.

Your Neighborhood Has Seen Better Days

If home values in your area are plummeting, sometimes leaving and “cutting your losses” makes the most sense. Events like rising crime rates or natural disasters can cause property values to drop.

Selling your home is a big decision, especially when you may be taking a financial loss. If you have the flexibility, research all your options before committing to a sale.

Selling After Buying FAQs

Still curious about how soon you can sell your house after buying it? We’ll answer some frequently asked questions.

How long after buying a house can you sell it?

Once you’ve closed on a house, you can sell it at any time. There is no hard-and-fast rule, but experts recommend staying in your home for at least 5 years before you sell. If not 5 years, you may want to stay at least 2 years to avoid capital gains tax.

What happens if I buy a house and then sell it?

If you need to sell fast, you risk losing money to capital gains tax, mortgage prepayment penalties all the costs associated with a home sale and moving costs.

Are there alternatives to quickly relisting a home?

If you want to move but don’t want to relist your home, consider leasing the home as a rental property. Renting out your home doesn’t mean you aren’t responsible for it anymore – or its monthly mortgage payments. While you’re renting your home, you’re paying off the mortgage, and you’re also building equity. When you’re ready to sell, you may not suffer a large financial loss because of the equity you built in the home.

If you belong to a homeowners association (HOA), check the rules before renting. Your HOA may not allow you to rent your home.

How soon after buying a house can you refinance?

The typical waiting period to refinance a mortgage is 6 months. But the timing of how soon you can refinance after buying a house will vary based on your loan, what you plan to refinance to and your lender’s criteria.

Most lenders require a consistent mortgage payment history, though some allow you to refinance almost immediately after closing.

The Bottom Line: Not All Home Purchases Yield A Happily Ever After

Sometimes, a home purchase just doesn’t work out, or an unforeseen event requires you to live somewhere else – and that’s okay. Homeowners choose to part with their property early for a variety of reasons. Although the early sale of a home can often lead to financial loss, there are some cases when you can get rid of a home quickly and turn a profit.

If you’re ready to sell your home and move on to your next adventure, explore home selling options with Rocket Homes℠ today.