How Soon Can You Sell a House After Buying It?

How Soon Can You Sell a House After Buying It?

If you’ve recently purchased a property and are looking to sell, it’s important to understand the perfect time to do so. The last thing you want is to incur extra fees, or lose money on the house, so selling at the optimal time is vital. 

So, how soon can you sell a house after buying it? Let’s take a look, shall we?

How Soon Can You Sell a House After Buying It?

Legally, if you’ve purchased a house, you can sell it whenever you like, it is yours after all. However, selling too early can result in you losing money on your investment, as well as incurring tax penalties. 

When a mortgage begins, the initial payments are mostly in interest. You will also likely have to pay real estate agents, who can charge as much as 6%. 

Another possible downside of selling a house too quickly is what is known as ‘negative buyer perception’. Many websites for buying properties, such as Redfin and Zillow will have details of when the property was last purchased and sold. If buyers see that you purchased the house and sold it less than two years later, they may assume that there was something wrong with the home. This can devalue the house and make it appear less desirable. 

When is the Best Time to Sell a House to Avoid Real Estate Capital Gains Tax?

Though you can sell whenever you like, experts recommend that you wait at least 2 years before selling. The reason for this is that selling after less than 2 years means that you will incur capital gains tax on any profits that you make. 

The capital gains tax on real estate property is another concern. For Arizona state it is a flat 4.5% on net capital gains. 

Example: If you have bought a house for $500,000 and sold it for $600,000. Then your net capital is:  Net Capital Gain = ($600,000-$500,000) = $100,000

Tax incurred on capital gain = $100,000 × 4.5% = $4500

real estate capital gains and tax calculator

If, however, you’ve lived in the residence for two years or more, you can write off up to $250,000 in capital gains tax, or $500,000 for married couples. Known as the 2 out of 5 year rule, it states that you must have lived in the property for at least 2 out of the last 5 years before the date of the sale. 

There are some exceptions, such as changes in employment status, health issues, natural disasters, death in the family etc. 

Generally speaking, though, if you wish to avoid the capital gains tax penalty, try to wait at least 2 years before selling your house. 

How Soon After Buying a House Can You Sell It?

Buying a house is a big commitment, and is a decision which requires a lot of thought, a lot of planning, and of course, a lot of finance as well. Buying a house is one of the biggest purchases you will ever make. 

For most buyers in the U.S, once you purchase a house, that’s it for more than a decade. In fact, statistics show that U.S homeowners stay in their homes, on average, 13 years after buying. That’s all well and good, but what happens if you want to sell quickly, or a change in your circumstances means that you need to sell quickly? 

This is tricky because the real estate market varies from state to state, and there are a lot of other variables to consider. 

After buying a house, you will have of course paid closing costs, real estate fees, interest fees, and so on. Unless you are able to add a significant amount of value to the house in a short period of time, you got the house for a price well below market value, or unless there is a real estate market boom, you’ll likely lose equity if you sell too quickly. 

There’s also the 2 out of 5 year rule to consider. With that said, experts recommend that you wait until you reach the ‘breakeven point’ before you list the house for sale. Most experts recommend 5 years as a general rule of thumb. Just remember, to avoid paying capital gains, you should wait at least 2 years. 

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