How Long Should You Wait to Resell a Home?

People purchase a home, move-in, and then several things can pop up unexpectedly in life such as a pregnancy, or new job, or maybe you discover that you’re just not a fan of the neighbors or the actual location of the home is not as ideal as it originally seemed. Or maybe you’ve discovered that your house has rapidly increased in value with the hot seller’s market that we are currently in and you are thinking the amount of equity you have accrued would be nice to put down on a home that meets your dreams even better. How Long Should You Wait to Resell a Home?

Can you sell a home too quickly after purchasing one? Is there such a thing as selling a home too soon after you buy it? Will there be any legal consequences to selling a home shortly after you’ve purchased it? Here are some things to consider before making a hasty move in selling your home if you only lived there for a short period of time.

How soon can you legally sell a home after you have closed on the final sale?

If you have finalized all the paperwork and receive the keys to your brand-new home you could sell it the very next day if you so decide. There is no legal ramification to this. This is referred to as a double closing, or concurrent closing, and is carried out by home wholesalers all the time. Even though you are legally entitled to sell your brand-new home whenever you want, it doesn’t mean that it is the greatest idea. For the majority of traditional homebuyers, it takes anywhere from six months to two years before it would financially make smart sense to sell a home depending upon price appreciation and the manner in which you finance the home.

Three reasons selling a home too quickly would not be the best idea

Capital gains tax

If a property gains equity, which is an amount of money that the home is worth above the amount the property owner currently owes on the home, and you will be generating a profit upon selling the home, you are subject to be taxed on this amount as income. Selling a property after you have lived there for at least two years lowers your capital gains tax responsibility significantly. The exact amount and what you are taxed depends upon your specific IRS income tax bracket.

Pre-payment penalties

If you have taken out a mortgage loan on the home there may be a clause in the contract for your mortgage that states you must pay a fee to close out your mortgage loan early. Not every mortgage loan includes this but it is worth checking into to make sure that your loan does not have a pre-payment penalty. Some penalties may require you to pay just a few months’ worth of interest while others could expect a percentage of the entire balance of the loan.

Considering the break-even point

Even if your home has a significant amount of equity in it, this will not mean that you will turn a profit upon selling the home. All of the additional expenses that come with buying and selling a home need to be determined to help evaluate if a profit could be made. There are costs to consider such as paying for closing costs, paying any real estate agent commission, having money for any important repairs, and so on. The less equity you have in your home the less likely it is to turn a profit in a short amount of time.

No matter what your reason for selling your home fairly shortly after you have purchased it, make sure that you consult with a financial and a real estate expert to go over if it really is the best decision for your individual situation.

Thinking of selling or just have more questions? Contact me anytime for tips on buying and selling homes in Wheat Ridge, Denver, Arvada, and Edgewater.