When Can I Sell My House After Buying It?

Selling your house sooner than expected because of reasons like career/job change, family change, emergency health care, and money situation is acceptable. But, buying your property today and selling it tomorrow only to gain profit is not practical. And you very well know that practicality is crucial in today’s modern world. 

You can do nothing for unavoidable reasons leading to house sales unexpectedly. But, if there is no such strong reason to take this decision, you should rethink and try to find out why this decision is not right. 

The right time to sell your house after buying 

You should follow the five-year rule, meaning you should live in the house for at least 5 years before selling. It’s said that equity in a property builds over time. 

The average value of the property increases by 2% to 2.5% annually while the average sales costs are around 10% of the purchase price when you sell the house. The 10% includes different selling costs. 

If you will live in your house for 5 years and use an annual appreciation rate of 2%, your property will gain enough value. 

Try to live for at least two years- If 5 years isn’t acceptable, you should live in your house for at least 2 years. This will not increase the value of your house but save you from different problems. 

Disadvantages of selling your house sooner

Capital gains tax-If you stay in your house for at least two years, you will get certain tax benefits. But, if you sell it before the two-year mark, you will suffer from capital gains taxes. And these taxes can impact your finances negatively in the long term. 

Penalties for prepayments- As lenders are in the business of making money, they won’t be comfortable with prepayments. It’s because they will miss the interest on the payments if the loan is paid off much sooner than expected. To overcome this loss, many lenders charge penalties on prepayments, which are 2% to 5%. Sometimes, they charge a flat rate or percentage. 

Lower buyer perceptions- Whether you state the actual reason for selling your house soon or not, the buyers will be doubtful. They might assume that there is something wrong with the property, especially if you are selling it without completing two years of purchase. As buyers have easy access to listing history, they will know when the house was purchased. 

Things to consider if you are selling your house before a certain time frame 

Selling your house sooner than expected can be pricey. You might have to pay some extra costs that a normal seller doesn’t pay. The only thing that you should consider is the right calculation of your house value.

As you are selling early, you should do your math accurately to manage expectations, and plan and minimize stress. First, you should determine your home's fair market value. It’s difficult so you should seek help from a real estate broker.

The broker will determine the value of your home using neighborhood comps, providing market analysis, and recommending listing prices. 

If there are no strong reasons to sell your house, you shouldn’t do it. But, if the reasons are unavoidable, you should take help from a reputable real estate broker to sell your home.