How Soon is too Soon to Sell a Home?

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Life Happens

It happens to more homeowners than you might think.

You purchase a property with the complete intention of making it your home for 5, 10, 15, maybe even 30 years. Perhaps it’s the home you intend to live in from your post-college life through retirement. Maybe your goal is to never live in another house again!

But then life, as it always does, creates new plans. In some cases, you may need to sell your property shortly after buying it.

The reasons for needing to sell sooner than expected are numerous, and might include:

  • Marriage
  • Divorce
  • Pregnancy
  • A new job
  • The death of a loved one
  • Job loss
  • Bad neighbors
  • New construction

Whatever the reason, you’ll probably have questions about selling too quickly. This is a common concern in the home buying industry.

So how soon is too soon to sell a home?

The answer, of course, depends on your unique situation and your goals for the future!

Conventional Wisdom: 5 Years (Give or Take) to Sell a Home

Conventional wisdom in the real estate industry holds that you need to own a property for a certain period in order for it to be financially viable. Homeownership, in many ways, is an investment, so you often need to approach the subject with facts, data, and numbers.

There are many reasons why you may want to avoid selling a home shortly after the purchase.

If you sell a home quickly, you may have to pay “capital gains” taxes. According to federal tax code, you do not have to pay taxes on the sale of your personal home. The capital gains tax is intended for investors, not homeowners. So a typical home sale doesn’t trigger these taxes unless you are selling before two years of living in the home. If you are selling after one year, for example, you may have to pay taxes.

Some banks and lenders also charge a prepayment penalty, which is simple payment you have to make in order to pay off the loan early. These prepayment penalties can be anywhere from $1,000 to $10,000, depending on the size of the loan and your loan contract. Not all mortgages have prepayment penalties, but it could be part of your loan terms.

Finally, there is a break-even point for homeownership and mortgages. Mortgages cost money, and you need time to build equity in the property. Because mortgages are front-loaded with interest, it often takes about five years to reach the breakeven point.

For these reasons, conventional real-estate wisdom says you should hold a property for at least five years, although some say this can be shorter.

Are There Any Legal Issues When Selling the Property Quickly?

There is no law, at least as far as we know of, that would keep you from selling the home quickly. Yes, there are tax laws that apply, but it’s not illegal to buy a property in the morning, then turn around and sell it before the day is over. This process, in fact, is sometimes called “double closing” and it’s a common practice among investors, “flippers,” and real estate wholesalers.

Will People Think Something is Wrong with the Property?

There is a concern that if people see a property on the market only a few months after being sold, they will be hesitant to buy. According to this theory, buyers will be worried that something is wrong with the home.

This concern, however, is largely unfounded. You don’t have to dive into all the details, but with a clear explanation, people will understand that the home is perfectly fine. Most people understand that there are many reasons to move shortly after purchasing a home. Explaining WHY you are selling so quickly will ease concerns and help you find the        buyer for your property.

If You Have to Move Quickly, Turn the Property into an Investment

It’s important to consider another important option: holding the property and using it as an investment. You could make the house a rental, which is a tremendous way to turn an existing property into a money-making asset.

Keeping the property in your possession can be a useful way to earn a monthly income from an asset that you already own, which makes it a convenient, profitable investment. Depending on your home loan and how much you can charge for rent, you can, as the old adage goes, have someone else pay your mortgage! This is certainly worth considering in the decision-making process.

Holding onto the property brings an important opportunity: appreciation. In a real estate market highlighted by low inventory and population-rich growth, the supply-demand balance is tilted towards owners. This is the biggest upside to keeping the property, as you’ll not only earn a monthly rent check, you’ll have an asset that is growing in value.

This requires detailed planning, including estimates for all the financial figures. But with a little planning, you can turn your existing property into one of your strongest investment assets!

Finding the Loan for Your Next Purchase

The decision to do anything with real estate is a big and valuable decision. Not one to run from, but rather to run to with the right team to help you prepare and understand.

Contact our team directly or use the form above and let us work with you to help you find the perfect mortgage for your future goals. (503) 461-5060,

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