Homeowners in Canada live in the same house for 7 years on average before listing it for sale. While these figures are general, the average homeownership for those in metro areas is between six and 18 years. Buying a home is beneficial for many reasons. While it is costly upfront, the pride of owning a home and not having to pay monthly rent is assuring. House value can also appreciate, increasing your equity.
Unfortunately, nomadic homeowners should reconsider buying a home. Besides being costly, selling sooner means they won’t benefit from value appreciation and equity. Nonetheless, life situations can force homeowners to sell their recently acquired homes. If you recently bought a home and were forced to sell it due to circumstances, you are probably looking for ways to sell your home faster. Below are a few things you should know in order to understand how soon you could sell a house after buying it.
Reasons for Selling a House After Buying
Several factors contribute to the desire to move. Among them include:
1. If Property Value Increases
Property value may increase overnight on rare occasions. If such occurs in your new neighborhood, you should consider ignoring the two-to-five-year rule of selling a home immediately after purchase. However, doing this depends on where you are relocating to. You’ll certainly benefit if you are moving to a low-cost metro area.
However, you shouldn’t consider this if you intend to stay in the same community. There’s a good chance you won’t find a nice place or end up paying more for a home like yours. Always scrutinize the numbers keenly. You should also consider this only if you profit significantly from the sale.
2. A Poor Neighborhood
A poor neighborhood is also a valid reason for selling your new home. If the neighborhood demonstrates a downward trend, there is a high chance that your home won’t be profitable in the future. The value of neighborhoods can spiral downward for various reasons.
For instance, the construction of factories introduces new pollutants and noise. Always evaluate the changes in your neighborhood to determine whether they can potentially devalue your property.
3. Monetary Issues
You should also consider relocating for financial reasons. Natural life situations, such as divorce or income loss, make it mandatory to downsize. On the other hand, happy reasons, such as increased income or if you just got married, may necessitate upsizing.
How Soon Can You Sell a House After Buying?
Unfortunately, there’s no straightforward timeline for selling your home after buying. However, the more time you spend in your home, the better off you become financially when selling it. Ideally, you should live in your home for at least two years before listing it for sale. This is enough time to build your home equity and offset closing costs.
Some circumstances make it impossible to wait two years before selling. If this is the case, doing some calculations helps you anticipate potential losses. Knowing the financial outcomes of the sale beforehand reduces stress. You also make practical selling decisions.
To understand your financial position after the sale, begin by getting the fair market value of your property. For this, consider hiring professional appraisers. You should then subtract the closing costs, mortgage payoff amount, and staging costs for sale.
Unless you’ve made significant principal mortgage payments in the few months you’ve owned the house, mortgage payments won’t likely cover the selling costs or break even. The only way to profit from the sale is by banking on increased property value during ownership.
Factors to Consider Before Selling
You should consider the following before listing your new home for sale:
1. Initial Costs
How much you’ll bank after selling your home is your net proceeds. However, net proceeds and net profits are not the same. Similarly, your net proceeds won’t be the same as the initial purchase price, even if the new buyer pays the amount in full. This is because of the various costs of selling a home. Start by summing up the initial cost of the house and the remaining mortgage, less the staging and closing costs. You can make sense of your financial position after evaluating these values.
2. Paying off Closing Costs
You’ll incur a lot of unexpected expenses when selling your home. This includes property and transfer taxes, attorney fees, and more. All these are typically deducted from the purchase price. Closing costs vary depending on the condition and location of the property. Typically, closing costs take between 1% and 3% of property value.
3. Capital Gains Tax
You should also keep an eye on capital gains tax. These taxes are based on net profits or capital gains homeowners make from selling their homes. Fortunately, you can take advantage of the IRS provision that exempts homeowners who make profits of less than $250,000 or $500,000 for married couples from paying capital gains taxes after the sale. However, the catch is you should have owned the property for two or more years to benefit from the exemption.
Potential Losses for Selling a Home Soon After Purchase
Homeowners also suffer losses from selling their homes sooner. Key drawbacks include:
- Capital gains tax – You should own the home for at least two years to avoid paying capital gains tax. Otherwise, the IRS will impose taxes on the first profits of more than $250,000 and $500,000 for couples. This might represent up to 10% of the total value of your home, making it a significant loss.
- Affects perception of potential buyers – Potential buyers will certainly reconsider before buying the property. Buyers might assume specific issues drive your sale of the house.
- Mortgage prepayment penalties – Mortgage lenders can also charge prepayment penalties for selling your home sooner.
Endnote
Selling your new home without making a loss is daunting. Finding the right buyer takes significant time and effort. You’ll also incur closing and staging costs, mortgage prepayment penalties, and other costs, significantly reducing your net proceeds. If the sale is forced by circumstances, such as job transfer or loss, working with professionals can help you sell quickly for a fair value.
If unforeseen circumstances arise necessitating the sale of your recently acquired property, rest assured that SLG Home Buyer offers a quick and efficient solution. With SLG Home Buyer, you can expedite the selling process without the hassle of traditional methods. Whether you’re facing financial constraints, relocation requirements, or any other unexpected situation, SLG Home Buyer understands the urgency and offers a streamlined process to help you sell your property promptly.