Can I Sell My House at Any Time?

When you first buy a home, you probably expect to live there for the next several years. However, sometimes life has other plans. Unexpected events like divorce, changes in employment, or medical conditions can all severely impact a homeowner's financial state and make it necessary for them to relocate shortly after they’ve begun to settle into their new home.

Needing to sell a house soon after purchasing it is more common than you may think, and the good news is that in most cases, it is doable. People ask if they can sell their house after 2 years or 5 years have passed, or even question if they can sell a house right after they buy it. There is no official time limit that someone must own a home before they can sell it. However, before you move forward with selling a recently purchased home, there are a few points you need to consider. Read on to learn about the typical issues that can arise when selling a house soon after buying it.

You may not have any equity in a recently purchased home.

With real estate appreciation, most people expect to make a profit when selling their home, but that won’t necessarily be the case if you haven’t owned it for several years. It usually takes a while – at least 5 years – for a property’s value to increase by a significant amount to make it worth selling.

In fact, selling a home you have little or no equity in might actually cause you to lose money when you factor in expenses like realtor fees, title fees, and closing costs, so don’t be surprised if the sale of a recently purchased home takes a toll on your bank account.

Your mortgage lender may have a prepayment penalty.

Paying off any debt seems like the type of behavior that should be rewarded. But unfortunately, some mortgage lenders don’t see it that way. In the bank’s eyes, paying off your mortgage quickly means they can’t charge you interest, so they’re making less money off of you than they would like. That’s why many mortgage lenders enforce fees known as prepayment penalties, which force homeowners to pay extra money if they contribute too much to their home loan payments in a short period of time.

As a rule of thumb, lenders don’t want borrowers to pay off more than 20% of a mortgage in a year. This means that if you sell a house less than 5 years after buying it, you are likely to trigger a prepayment penalty and could potentially need to pay thousands of dollars out of pocket.

You might have to pay capital gains taxes.

Capital gains taxes are fees that investors are required to pay when they make a profit off of their investments. While a home is legally considered an investment, homeowners are typically exempt from capital gains taxes on most or all of the profits of a home sale. However, this exemption has a few exceptions, and selling a newly purchased property is, unfortunately, one of them.

A person can only take advantage of the capital gains tax exemption when selling a home that has been their primary residence for at least 2 of the last 5 years. Furthermore, if you’ve owned the house for less than a year, your profits from the sale will be taxed as income, which can result in you paying as much as 37% in taxes. If you're selling a home you've owned for 1–2 years, expect to pay either 15% or 20%, depending on your tax bracket.

Down payment assistance programs may limit when you can sell.

Some down payment assistance programs come in the form of forgivable loans. This means that a homeowner isn’t expected to pay back their loan if they stay on a property for a set period of time. This period is typically 5 years, but some lenders may require a home to be lived in for as long as 15–20 years.

If you used a forgivable loan to pay for your house, you would likely need to pay back some or all of your loan after selling, and depending on just how much you owe, it might be tough for you to afford a new home.

New developments may have rules you need to follow.

If your home is located in a newer construction development, there may be restrictions dictating how early you can sell a property after buying it. The companies building new homes don’t want to compete with current homeowners for customers—they want the buyers to come directly to them—so sometimes, they won’t allow homeowners to sell their property until a certain amount of time has passed. While this is admittedly not a particularly common issue in the Houston area, it’s still wise to check your sales contract for terms and conditions before attempting to sell a home.

Buyers might be suspicious.

If a home hasn’t been lived in for very long, buyers tend to question why it’s for sale. They wonder if the current residents are looking to move out because there’s something wrong with the property. Unless you’ve done major renovations for the home to appear ‘flipped,’ expect that buyers will need to be convinced that the house is worth buying. It’s best to be transparent about the reasons why you are selling to reassure potential buyers that they won't also need to move out after a short time.

Are you looking to sell a recently purchased home?

If you’ve decided after taking all of the above points into account that selling your home is the best option for you, consider selling to AMI. Regardless of the reason why you’re selling or the condition of your home, AMI will be happy to provide you with a no-obligation cash offer. Contact us today to get started!