How Long Should You Live in a House Before Selling | Downsides of Selling a House Right After Buying It | Calculate If You Will Make a Profit? | Increase Your Chances of Making a Profit | Frequently Asked Questions About Selling a House Soon After Buying It
|⏱️ How soon can you sell a house after buying it? ⏱️
You can sell a house as soon as you want after buying it. But the general rule of thumb is to live in a house for at least two years before selling. This can help you avoid an unnecessary tax bill and may provide time for the home to appreciate in value.
You can sell a house as soon as you want to after buying it — but selling a house too soon after buying it comes with downsides. Experts recommend waiting two years to avoid capital gains taxes.
In some cases, however, you’ll need to sell ASAP. If you’re going through a divorce, dealing with inherited property, or facing a financial bind, you might be unable to wait the full two years.
No matter what your situation is, it’s important to understand the tradeoffs of selling your home soon after buying it.
How Long Should You Live in a House Before Selling?
Experts generally recommend living in a house for at least two years before selling, and five years is the ideal waiting period to make an actual profit on a sale.
Waiting can help you avoid capital gains taxes, make renovations and repairs, build community, and allow the home to gain value. But there’s no hard-and-fast rule for how long you should live in a house before selling. The answer depends on market conditions, your location, and your payment method.
Homeowners spend an average of 13 years before selling, but job change, divorce, loss of income, or other personal reasons like sickness in the family might make it necessary to sell quickly.
Also keep in mind that it costs money to sell a house — 8–10% of the home price on average. Given the right conditions, you’ll at least break even on what you paid for the house and closing costs. But if your home hasn’t appreciated enough, these costs can easily cancel out any profits you stand to make. If this is the case, it may be best to delay a sale.
But if you’ve made significant improvements to your home or if the real estate market is booming, you could sell your home sooner than five years after you bought it and still make a profit.
|🗓️ What’s the Five Year Rule? 🗓️
The five-year rule is a guideline that says you should wait at least five years before selling your home. The thinking behind this rule is that it provides time to build up enough equity to make a profit, and helps you avoid hefty capital gains taxes.
What Are the Consequences of Selling a House Shortly After Buying It?
There are several consequences to prepare for if you do decide to sell your house soon after buying it. Make sure you understand these implications before making a decision.
Higher Capital Gains Tax
Capital gains tax is a tax on profits from the sale of investments, like stocks, bonds, and real estate. It’s levied at a rate of 0–20%, according to your tax bracket.
If you sell your home within a year of buying it, you’ll have to pay short-term capital gains tax on the sale, meaning you’ll be taxed at a regular income rate (10–37%), which will most likely be higher than the capital gains rate.
If you have lived in the house for at least two years total (not necessarily consecutive) within the past five years, it qualifies as a primary residence, which means you can get a tax exclusion from the IRS.
If you wait longer than two years to sell, you may be able to avoid paying capital gains taxes, depending on your tax bracket and filing status, or at least be taxed at the capital gains rate rather than the regular income rate, which will save you money. Protect your interests by consulting with a tax professional who can advise you regarding when to sell.
Less Time to Increase Home Value
In real estate, time equals value. The longer you stay in a home, the more money you’ll make when you sell it. In fact, home values generally increase from 4% to 8% on an annual basis. If you’re not in a rush to sell, consider holding onto your home for a few years to maximize your profits.
Typical Closing and Moving Costs – Again
You’ll have to buy another house right after paying costs like real estate commissions for the home you’re selling.
You’ll also have to cover some closing costs, which can add up to 2–5% of the sale price. On top of that, you’ll be faced with the costs of moving, which average around $1,400 for moves within 100 miles and $4,000 for moves out of state.
Negative Perception (and Lower Sale Price)
Previous sale dates are public record, so if you try to sell your home too soon after buying it, you may get lowball offers from buyers who think something is wrong with the property – or you might not get many buyers at all.
How to Calculate If You’ll Make a Profit on Your Home Purchase
Selling your home soon after buying it means you may not have built up much equity. And if you have to pay a real estate commission and other selling costs, you may not make much of a profit — or any profit at all.
Calculate whether or not you’ll make a profit on the sale of your home by:
- Adding up the costs of selling your home. This includes real estate commissions, moving costs, capital gains taxes, and closing costs. Also include the payoff amount for your existing mortgage.
- Subtracting the selling costs from the selling price of your home.
- Comparing the new total to the original purchase price of your home. If the sales price minus the selling costs is higher than the original purchase price, you’ll make a profit. If it’s lower, you’ll take a loss.
Here’s what it might look like to sell a home one year after purchasing it in an average market, based on a $400,000 initial purchase price and a $425,000 selling price.
|Capital gains tax (20%)||$5,000|
|Closing costs (10% of $425,000)||$42,500|
|Remaining mortgage balance||~$315,500|
|Total costs from original purchase (5% of $400,000)||$20,000|
|Original down payment (20% of $400,000)||$80,000|
|Total expenses for buying and selling||$466,000|
|💰 Total Loss (total expenses – selling price)||-$41,000|
How to Make More Money Selling a Home You Just Bought
Best Option: Sell With a Low Commission Real Estate Company
If you need a sell fast, a low commission real estate company can help you find agents who have experience with quick sales — without paying the standard realtor commission.
In a typical home sale, you’ll be responsible for paying approximately 5-6% of your home’s sale price in realtor commission. This includes commission for both your listing agent and the buyer’s agent — and it can take a big bite out of your sale proceeds.
Low commission real estate companies aim to solve this problem. These companies offer built-in savings that lower the cost of realtor commission.
However, it’s important to know how low commission real estate companies achieve these savings. For example, Redfin uses a team-based approach — so you may not have a dedicated agent handling your home sale.
Complete High-Value Projects Before Selling
It may be worth completing some high-value projects like a kitchen remodel or a bathroom renovation to increase the value of your home before listing it. You won’t make a profit if you spend too much on renovations, so weigh the cost of the projects against the potential increase in sales price.
A local real estate agent can help you determine which improvements are likely to add value to your home or help it sell faster in the current market.
Wait a Little Longer to Avoid Some Taxes
You can’t always control when you sell your home, but waiting as long as you can to list your property may help you avoid taxes.
DIY Your Moving and Selling
You may be able to save money — and make more profit — by skipping hiring professional movers and getting some help from friends.
You can also avoid real estate commissions by selling your home yourself. Selling your home without a real estate agent is known as a “For Sale by Owner” or FSBO listing. If you go this route, you’ll be responsible for marketing your home, negotiating with buyers, and handling all of the paperwork. Here are some of our favorite sites that make it easy to sell your home yourself.
How soon can you sell a house after buying it?
You can sell a house as soon as you would like after buying it, but most real estate experts recommend waiting at least two years — ideally five. Learn more about selling a house soon after buying it.
How long should you live in a house before selling?
Real estate experts typically recommend living in a house for at least two years before selling it to avoid capital gains taxes and build up home equity. Learn more about the timeline of selling your house.
Can you sell a house within six months of buying it?
Yes. You can sell a house within six months of buying it, but you probably won’t make a profit on it. Experts recommend you wait at least two years before selling. Learn more about selling a house soon after buying it.