If it's illegal or dangerous, you're free to do whatever you want with your property. You can buy a house today and sell it tomorrow if you want. However, it might not be practical or wise. Nowadays, practicality is crucial.
So, after buying a house, how fast can you sell it? Here are some details. Read on.
Homeowners sometimes sell a property sooner than expected.
Property owners list their properties for several different reasons. We all face challenges and opportunities that lead us to make pretty big decisions that affect our lives. These are the most common reasons why people sell their homes quickly:
Changing careers
People sometimes sell their homes because of their jobs or want to move closer to their office.
Family changes
Life stages change people's space requirements. It might be a first child for newlyweds or another baby for couples with kids already. Or perhaps empty-nesters downsize as the kids leave. After losing a loved one, getting over grief and trauma can lead to people moving to a new home.
Money situation changes
Nothing is certain in life. It was proven by COVID-19. As a consequence, people had difficulties making mortgage payments. Without the pandemic, it is still highly possible for someone to lose their job or for property taxes to rise. When a person's finances change dramatically, they may be forced to sell their home.
Emergency health care
Some medical conditions require that a person release equity to pay for health and living costs. In some cases, people choose to list their properties to move closer to their sick family members to look after and care for them.
Seller's market conditions
Homeowners sometimes want to make a profit in a hot seller's market. Some people who gain equity quickly sell their house and buy another one.
Buying regrets
Buyer's remorse is common for impulse buyers, particularly if they're unhappy with their purchase.
Different reasons may apply to homeowners who ask people how fast they can sell their house after they buy it." These are the reasons why they list it prematurely. The most lucrative and foolproof investment, real estate, can be ruined by one bad decision.
Is it possible to sell a house without losing any money?
There are various reasons to sell a property unexpectedly, and all of them carry financial risks. Before making any final decision about selling their home, people who are seriously considering doing so need to consider a few things first.
U.S. Housing Administration Guidelines
First and foremost, prospective sellers should consider FHA loans. Lots of buyers use these loans to buy properties. A person must own a property for 90 days before the FHA will insure a loan used to purchase it.
Most buyers use FHA loans for home purchases, so there are fewer buyers for properties that are under 90 days old. Private lenders will be forced to offer conventional financing to buyers considering the property.
As a result of the smaller number of qualified buyers, the property will also sell for less, which means a loss for the owner.
Costs
A house can also be quite pricey to sell. Selling a house isn't cheap. Here are some fees involved in selling a house:
- Closing costs
- Fees
- Payments
- Pay Escrow
- Interest penalties
You will spend a lot of money on those things. There is no escaping it. Homeowners looking to sell should get guidance from a professional that knows the process. Your best bet is to hire a licensed broker.
You can find the best industry professionals in your area by using real estate agent directories if you do not know any.
Five-year Rule
A common misconception about investment property is that you need to live in the house for five years before breaking even. The equity in a property builds over time. Real estate is one of those things that gets more valuable as it ages, like fine wine.
An average property's value increases by 2% to 2.5% annually. Average sales costs are around 10% of the purchase price when homeowners sell their houses. The 10% covers all the different selling costs. The property will gain enough value over 5 years if we use an annual appreciation rate of 2%.
The Breakeven Point
At the very least, selling a home should always be considered a break-even proposition. It is very safe to follow the five-year rule, but there are always exceptions.
Property may gain enough equity in less than five years to offset ownership costs, as well as transaction costs. Some cases take more time.
If there is an unexpected need to sell fast, sellers must know how to calculate right and accurately minimize losses.
Calculating
Before selling, it is recommended that homeowners live there (or hold on to it) for at least two years. Two years should be enough for the property to gain enough equity to offset the closing costs under normal market conditions. You may also qualify for tax benefits.
You need to do the math if you have to sell fast and not wait two years. Knowing what numbers you're going to get will help you manage expectations, plan, and minimize stress.
Calculate fair market value
A seller should first determine the property's fair market value. An agent can assist with this. Professionals can appraise homes for those without agents.
Real estate agents help determine a home's value, using neighborhood comps, providing market analysis, and recommending listing prices.
What's the point of selling early?
When can you sell a house after buying it? How long should you wait? Are there any factors that should make homeowners reconsider selling?
Capital Gains Tax
Certain tax benefits are available if you stay in your house for at least two years. Selling a house is tax-free. A couple might be able to get $500,000 for $250,000.
Selling before the two-year mark will result in capital gains taxes. Get more insight on this matter from a professional tax advisor.
Penalties for prepayments
A prepayment penalty may apply when a property is sold within a certain time frame after it is purchased. Lenders are in the business of making money. They can recoup some interest payments they miss because the loan is being paid off much sooner than expected. Most lenders charge 2% to 5% as penalties. Sometimes it is just a flat rate or a percentage.
Lower buyer perceptions
Due to easy online access to listing history, potential buyers and agents can learn when a property was purchased. They might assume something is wrong with the property if it's up for sale and lose interest if they see it bought less than 2 years ago.
Sellers who do not clearly state their reasons will likely receive fewer and lower offers.
Conclusion
The short answer to "When can a house be sold after being bought? You may be able to make money off of it, but it's not the smart thing to do. If there are no strong reasons to sell the property, quickly selling will only leave you with a loss and a bad case of seller's remorse. Talk to the right people before you make any rash decisions.
If you’d like to talk more about property management, or you need help with Everest Property Management, please contact us at Everest Realty.
As a top producing Realtor and Property Manager; Terry specializes in sales, extensive construction homes, rentals, REO’s, short sales, and all aspects of Real Estate. After graduating the University of Michigan with a master in MBA, Terry continued his endeavor and now has over 15+ years of experience in the Real Estate world. If there is anything that has to do with Real Estate and sales, you can always be sure of Terry to provide important, specialized knowledge.
