If you’ve just bought a house but want to sell it, you have come to the right place. Here, we have prepared an extensive guide to help you understand the entire process and effectively optimize it.
Despite all our efforts, sometimes life doesn’t go as well as planned. You may be forced to sell your recently bought dream house for multiple reasons. Maybe you landed a new job with a huge income boost at a new location, maybe duty calls and you need to be somewhere else for some sort of family emergency, or maybe you gained equity faster than you thought and you wish to take the opportunity of turning a profit while you can.
Whatever the reason may be, if you have recently bought a new place but are looking to move after living in the house for less than a year, you need to be completely aware of and fully understand the financial implications that come with selling a house within such a short time period.
Not only will you have to pay capital gains tax in case you make some sort of profit but you will also be hit with a tremendously huge round of closing expenses – all of this within a single year. The process along with being heavy on the pockets will also come with the hassle of having to prepare the newly bought house for sale; right when you, yourself were trying to settle in.
Having said that, as long as you haven’t caused some serious damage to the property since you moved in, re-selling your house shouldn’t be very difficult especially, if you hire a professional real estate agent to assist you with the process. If you are seriously considering selling your newly bought house, it’s best to hire professionals who can help you sell for a heavily reduced flat fee.
When most individuals move into a new place, they plan to build a new and exciting life for themselves. However, when you realize that your new home just isn’t “the one,” you need to take some action steps right away. Here is everything you need to know about the process when you just bought a house but want to sell it:
Essential Things to Know
Following are some important things you need to remember prior to putting up your newly bought house for sale:
You Aren’t Likely to Generate Much Profit
When you factor in additional expenses of re-selling a property such as legal costs, real estate commissions and land transfer taxes, it might be almost impossible for your house to have appreciated enough in less than a year for you to generate a noticeable profit. Anyone who tells you otherwise simply isn’t being honest with you.
Buyers Know It All
Any potential buyer who is working with a realtor will know exactly how much you paid for the house yourself. There is no use lying about it. The potential buyers will also be easily able to determine at what rate the prices have gone up since you moved to the neighborhood.
Therefore, if you haven’t had any renovations done in the house, do not expect the value of your house to increase by even 20% of the previous cost. If you got a discount for some particular reason such as a desperation sale, you need to be able to make a convincing case in order to make a profit on the sale.
Getting Greedy Won’t Get You Anywhere
We understand that nobody trying to sell their real estate property wants to lose money in the process. However, you need to focus on your actual goal, which is re-selling your house. Over-listing i.e. setting the value unreasonably high will only cause your property to sit idle in the market for a longer period of time. You may even end up getting less than the market value.
Your Realtor Is Not At Fault
Many people, who decide to sell their house shortly after buying it, expect their realtors to help them break even. If you are one of those people, you need to understand that your real estate agent isn’t the one who got you into this mess. Expecting your stockbroker to help you make money won’t do you any good. Moreover, it is simply unethical to ask them to cut their commission and cover up for your losses with their salaries.
There Is Always a Way Out
If circumstances allow you, you can opt to explore some other options such as renting your property instead of taking a big financial hit. We will talk about these alternatives in detail later in this article.
Drawbacks to Selling Your House Shortly After You Bought It
When it comes to selling your home within a year of buying it, there are many challenges that you might have to face along the way. Most of those challenges are financial technicalities. Here are some downsides to selling your house shortly after you bought it:
The number of years you live in a house can majorly affect the amount of taxes that you have to pay when you decide to sell it. For instance, if you sell a property that has been your primary residence for at least two years, you may receive a tax-free profit of about 250,000 dollars when you are single and 500,000 dollars if you are married. However, if you have spent less than a year in a location, you won’t be able to benefit from such tax breaks.
Furthermore, you will have to pay higher tax rates. It doesn’t matter whether you are gaining profits from real estate, bonds or stocks, when it comes to short-term capital gains, the tax rate is always higher as compared to tax rates for long-term capital gains. On the other hand, if you aren’t an investor, chances are that you might not even be able to generate a significant profit; hence, your tax burden may remain minimal. However, the former in itself is a drawback.
When a real estate property changes hands, there is a specific expenditure involved known as closing costs. Even when you first bought the place, it is likely that you also paid for the closing costs of the property. Typically, you can easily earn back that money in home equity with time. However, when you sell your house within a year of buying it, you won’t have enough equity built up to cover all the financial losses.
Additionally, as a seller, you’ll also have the responsibility of paying some of those closing costs again. Particularly the commission fees of listing agents and buyers, prorated utilities and taxes and title transfer fees. Many homeowners find it quite difficult to pay two rounds of closing costs in a short time period.
Once again, when we talk about the logistics of shifting houses twice a year, the process can seem quite daunting. There aren’t many moving companies that offer a returning-customer, special discount. Thus, hiring movers nearly back-to-back can become a huge financial burden. Moreover, the physical and emotional toll can be enormous. Therefore, it is important that you rethink your decision and do what works best for you as well as your financial circumstances.
Alternatives to Selling Your House
There are a lot of financial losses associated with selling a property soon after buying it. In order to avoid those losses, one great alternative to selling the house is renting it out; if you can afford to do so. The best approach to implement this profitable method is moving into a new primary residence, keeping your recently bought house, finding some renters and recouping some of the expenses from your initial purchase. Moreover, you can also generate a passive income by becoming a landlord.
Having said that, writing up lease agreements and keeping renters happy requires a bit of know-how about real estate. However, if you are truly motivated, there is nothing that you can’t learn.
If you just bought a house, but want to sell it, the whole process can be a stressful experience for you. Due to closing costs and commissions, you stand to lose tons of money. However, if your circumstances are forcing you to make this decision, it’s best to optimize the procedure. Take steps such as listing your property with a flat-fee broker or take responsibility for some of the duties of selling property to minimize your out-of-pocket costs and maximize your profits.