Recently updated on January 14th, 2023 at 04:32 pm
What You Will Read In This Article
According to consumer data, a typical seller will spend 13 years in their home before putting it on the market. Buying a house is the largest financial investment most people will ever make, which means that it often makes sense to stick it out for the long haul before selling. This reduces the risk of local market swings and generally ensures that your home gains a significant amount of equity before moving on.
But life doesn’t always happen as planned and unexpected changes might mean that you need to sell your house much earlier than you anticipated. Changes in your job, the need to downsize or upsize, and other considerations may have you contemplating a sale after one year or less in your new home.
If you find yourself facing this difficult decision, this guide is for you.
Below, we’ll examine some of the pros and cons of selling your house after one year or less. We’ll explore the reasons why people might need to sell their house prematurely, and look at some of the advantages and disadvantages that come along with it.
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The Pros Of Having To Sell Your House After Just A Year
There are many reasons why you might be considering selling your house so soon after purchase. And frankly, you’re not alone. It’s not all that uncommon for a home buyer to resell their home within a year or less. In fact, it probably happens more often than you think.
Let’s take a look at some common scenarios and why selling your home sooner rather than later might make a lot of sense.
You don’t like the house
Did your dream home turn out to be not quite as perfect as you’d imagined? Things like underlying structural problems can quickly turn your new property into a money pit, with necessary work coming in more expensive than you’d budgeted for.
Or perhaps the area isn’t as safe as you were first led to believe, and you’re worried about crime and the safety of your family.
Whatever the reason for buyer’s remorse, if you’re unhappy in your new home, it might be time to consider an early sell, rather than falling victim to a sunk cost fallacy by sticking it out and being miserable.
If your family circumstances have changed, then your housing situation may also have to change with it. Perhaps there’s a new baby on the way, your older kids have decided to fly the nest, or there’s been a death in the family. All of these scenarios can lead you to re-evaluate your living situation and might require you to find a better home to suit the family’s new needs.
A new job offer, or job relocation, is one of the most common reasons why people opt to prematurely sell their house after 1-year or less.
Perhaps you’ve been given a new career opportunity further afield that you simply can’t refuse. Even if your new work is still relatively local, a longer daily commute can really affect your quality of life and eat into time that could be spent with family; selling up early and moving closer to work could be the best decision for you.
You need a different location
You may need to move house unexpectedly for reasons other than your job, for example, to be closer to elderly family members who need care. Or perhaps you’ve decided that city living is no longer suited to you and your family, and you crave the peace and quiet of the countryside. Quality of life is a major consideration and one that can impact your overall health and well-being. There’s no sense being miserable when you have options.
Real estate market changes
Unexpected changes in the market can compel you to sell your house much earlier than you first anticipated. You likely bought the home with the intention of staying in place for longer than a year, but unforeseen market circumstances may be favorable to sell sooner. Perhaps the market looks set to crash, and rather than ride it out and watch your property’s value fall, you’d rather make a quick sale and get out while you can. In other situations local economic outlooks, development and construction plans can play into your decision-making process.
Real estate investment
Even though selling a house so soon after purchase is not necessarily conventional, it can be extremely lucrative in the right circumstances.
House Renovation and Flip
Did you buy a “fixer-upper” at value with the intent of fixing it up to live in? Perhaps this was a “starter home” or all you could afford at the time.
If so, that new renovation may be the blank check you’ve been looking for. Many homeowners update and renovate their new purchase only to realize that they might be better off selling it for a profit and investing that money into their actual “dream home”.
In some cases, it might be worth more to you “sold” than to hang on to it. This is known in the real estate investment world as “flipping houses” (i.e. buying them at a value, making upgrades and repairs, and reselling at a higher price than the money invested).
Large Real Estate Market Appreciation
If you suddenly find yourself in a hot seller’s market, you might be tempted to take advantage of the situation and make a profit while the opportunity is there.
Has your house has gained equity quickly? For example, if a new development in your area has seen your neighborhood’s home values shoot up, then this could be the perfect moment to sell, even if you hadn’t previously planned to.
Personal situation changes
Sometimes life can throw us unexpected curveballs that mean we have to make a sudden change of plans. If this happens to you, don’t be too harsh on yourself. Although the reasons are virtually endless, below are a few of the most common situations that prompt the need for an early sale.
You can’t afford it anymore
Perhaps your financial situation has changed, and you’re no longer able to keep up with your mortgage repayments. Or maybe your property taxes have increased to a degree that owning the property is no longer financially beneficial. Medical expenses, adjustable-rate mortgages, unexpected job loss or layoffs and more can all put you in a bad spot.
Family emergencies can mean that a quick sale is your only option. Maybe you need to release equity to cover unexpected medical bills or help a family member in need with their living expenses.
Whether for work or family, the need to relocate can leave many new homeowners scrambling to sell within a year or less. Rather than pass up on an opportunity or to be closer to family, selling might be the better option.
Injury or Disability
Accidents and injuries happen all the time. From workplace accidents to car crashes, leaving individuals unable to navigate their current home with ease. In such cases, selling in order to downsize or move in with a caretaker might make the most sense.
Carefully Weigh The Cons Before Deciding
If you find yourself in one of the situations listed above, you may indeed have to sell your home despite having only recently purchased it. But before you rush in and make a rash decision, it’s important to consider the downsides of such a hasty house move.
Moving is stressful
Selling and moving are universally agreed to be one of life’s most challenging hurdles. The process is often full of red tape, deadlines, never-ending “to do” lists, coordinating movers, storage and dates and more. Even the most laid back and well-organized of individuals can find the process less than desirable.
It takes a lot of time
There’s a lot to do when you decide to pack up and move. Things like listing your property, arranging viewings, dealing with legal matters, finding a new property, not to mention packing, storing and moving all of your items to their new destination. It all takes a serious amount of time and effort.
It can impact children
Children of all ages can suffer from the stress and anxiety of a move, especially when it’s not just one but two house moves in the space of a year. Many children are only just settling into their new living arrangements after a year, having made friends in the neighborhood and at their new school. Another big upheaval can have a real impact. On the other hand, the longer they have to establish roots and connections, the harder it may be for them to make that separation, making the move sooner rather than later a better fit.
Nothing seems normal anymore
After relocating twice in such a short space of time, it may start to feel like your life is being consumed with buying and selling property, leaving little time for anything else. So much moving around makes it hard to settle down, make roots, and develop a normal routine.
Closing costs are expensive
Even if you do manage to sell your house for more than what you paid for it, closing costs can severely eat into any profits you stand to make.
Seller closing costs are the biggest expense. The average house sale can cost between 8% and 10% of the total sale price after you factor in things like agent’s commissions.
If you’re buying a new property, you’ll also have to consider buyer closing costs, which are generally around 2% to 5% of the purchase price.
That’s why it’s generally thought that selling a house in less than a year after purchase negates any of the financial benefits of homeownership. When all the costs are considered and evaluated, it may well have been more cost-effective to rent for the last year. It’s not just about clawing back what you originally paid for the property, but also the many other costs associated with buying a home.
There are tax implications
Both the state and the feds want their cut. By selling so soon after you purchase a property, you may be subject to capital gains tax.
Normally, if you live in your house for at least two years and it’s your primary residence, you are exempt from paying capital gains taxes on any profits you make from a sale. Individuals can claim this exemption up to the value of $250,000, and couples can claim up to the value of $500,000.
But if you sell your house before two years, you will likely be subject to capital gains taxes on any profits that you make on the sale.
There are some exceptions, for example, if you have been forced to move due to a death in the family, sudden unemployment, or due to a natural disaster. To find out where you stand with capital gains tax, and what you can do to minimize your tax liability, always consult with a professional tax advisor before making any major financial decisions.
Moving is expensive
If closing costs and capital gains taxes aren’t bad enough, you’ll also have to consider the additional moving costs. If you plan on hiring a professional moving company to help with your move, this can really drain your budget.Learn how to sell a house and save thousands with ISoldMyHouse.com.
Ways To Recoup Some Of The High Selling Costs
The good news is that there are a few ways you can claw some of the premature sale costs back.
‘For sale by owner’ is pretty self-explanatory; it’s a method of selling a house without the use of an agent or a broker. It can save you a fortune in agent commission, but of course, it also comes with the downside of having to do this alone, absent of expert guidance, assistance and a helping hand. You’ll be responsible for every aspect of the sale, from advertising your property to arranging viewings and negotiating a price.
PRO TIP: Some states require that a real estate attorney be present at closing, so be sure to research your state’s requirements and factor that into your costs.
Flat Fee MLS Listings
With a flat fee MLS listing, a real estate broker charges a flat fee, instead of a percentage of the final sale price, in order to list your site in the “Multiple Listing Service”. This enables the seller to take advantage of an ‘à la carte’ service agreement without having to use and pay for additional real estate broker services.
Flat fee MLS services allow you to still list your property where agents, brokers, investors and buyers are most likely to see it, while significantly cutting down on costs. On average, the seller stands to save around 50% on commission fees, compared with a traditional sale.
PRO TIP: Keep in mind you’re paying for the listing only. You’ll still be responsible for talking to prospective buyers and interested parties on your own, as well as scheduling and hosting your own showings.
Discount Real Estate Agents
Traditional real estate commission charges typically range between 4-8%. This fee then gets divided between the listing agent, the buyer’s agent, and their respective brokerages.
A discount real estate agent either charges a small a one-off flat fee, or a lower commission (such as 1%), while still providing a high level of service and support throughout the sale (but less than can be expected of a full-priced agent). They manage to do this by pushing through a high volume of sales in a quick time period, so both they and the sellers usually come out ahead. Be sure to interview the agent and ask enough questions to get comfortable with working with them for selling your house with their plan.
Alternatives To Selling Your House After Less Than A Year
If you’re concerned that you’ll lose out if you sell your house after less than a year, you have options.
Stick it out for a while longer
Whatever your reasons for considering an early sale, ask yourself if selling and moving is an absolute priority or need right now. Could you potentially hang on a little longer? For example, if you wait for two years, you can avoid paying capital gains tax and accrue more equity from your current property.
Of course, it all depends on your personal circumstances. Some situations may mean that you have to suck it up and bear the loss, while for others, it might be worthwhile to wait.
Rent it out
Rather than selling your home to buy a new one, you might want to consider renting it out to tenants. If all goes well, you’ll be able to cover your ongoing mortgage payments at your current home while it grows in value, leaving you free to either rent or purchase a second home that suits your current circumstances better.
This allows you to get a higher return on your investment since the longer you can hang on to a property, the more profit you usually stand to make on it.
It also leaves you with the option of returning to the house in the future if your reasons for moving are temporary.
Final Thoughts On Selling A House After 1 Year Or Less
Choosing to sell your house so soon after purchase is a big decision not to be taken lightly. There are many reasons why an early sale might be necessary and even beneficial, but it’s important to be armed with the facts before jumping in.
By weighing up the pros and cons of selling a house after one year or less, you’ll be making sure you make an informed decision that you won’t live to regret.