You just bought a house, and now you need to sell it. Maybe a new job came up, your family situation changed, or the house just is not working out. Can you do that?
Yes. There is no law that says you have to keep a house for a certain amount of time. You can sell it the day after you close. But selling soon after buying can cost you money, and your mortgage and taxes come with a few rules. Here is what to know before you decide.
We are not tax advisors or lenders, so check the money questions with a CPA and your loan company.
How Soon Can You Sell a House After Buying It?
Legally, right away. In practice, three things can slow you down:
- Your mortgage’s move-in rule. Most home loans for a primary residence (conventional, FHA and VA) say you plan to move in within about 60 days and live there for at least a year. A real change in your life, like a job move or a divorce, is usually not a problem. Buying a house you never meant to live in, and saying you would, is.
- The FHA 90-day rule. If you sell within 90 days of buying, your buyer cannot use an FHA loan. That cuts out a lot of first-time buyers. Between 91 and 180 days, an FHA lender may need a second appraisal if your price jumped a lot.
- A prepayment penalty. Most home loans today do not have one, but check your loan papers to be sure.
Why Selling Early Can Cost You
The biggest issue is money. When you sell a house you just bought, you pay to buy and then pay again to sell, with very little time to build up value in between.
- You have little equity. In the first few years, most of your mortgage payment goes to interest, not to paying down the loan. If you put little money down, you may owe almost what you paid.
- Selling costs add up. Agent commissions and closing costs often run 6% to 10% of the sale price. See the full cost to sell a house.
- Prices may not have moved. If home values stayed flat since you bought, you have nothing extra to cover those costs.
Put those together, and some people who sell in the first year or two have to bring money to closing to pay off their loan. Before you list, ask your lender for a payoff amount and get a real idea of what the house would sell for. Our guide to finding your home’s fair market value can help.
Taxes When You Sell Soon After Buying
If you sell for more than you paid, you may owe tax on the profit. How much depends on how long you owned and lived in the house:
- Owned one year or less: Any profit is a short-term capital gain, taxed like regular income.
- Owned more than a year: Profit is taxed at the lower long-term rate.
- Lived there 2 of the last 5 years: Most people can skip tax on up to $250,000 of profit, or $500,000 for married couples filing together.
Selling before two years because of a job move, a health problem or certain other unexpected events? You may still get part of that tax break. Read more on avoiding capital gains tax on a home sale, and run your numbers by a CPA.
Will Selling Hurt Your Credit?
No. Selling a house and paying off the mortgage does not hurt your credit. What can hurt it is falling behind on payments while you wait for the house to sell. Keep paying until closing day.
If you plan to buy again soon, lenders will look at your whole history. Selling quickly because of a job move is easy to explain.
Common Reasons People Sell Right After Buying
- A job move or PCS orders. See our guide to selling a house and moving out of state.
- Divorce or a breakup. Here is how selling a house during a divorce in Virginia works.
- The payments are too much. Higher taxes, insurance or a job loss can turn an affordable house into a stretch.
- Surprise repairs. Problems the inspection missed, like a leaking roof or a failing HVAC.
- A health or family change. A new baby, an aging parent or a medical issue can change what you need from a home.
Your Options Besides Selling
If the numbers do not work yet, you have other choices:
- Rent it out until you have more equity. If you got a low mortgage rate, this can make sense, but you become a landlord.
- Talk to your lender if the payments are the problem. They may have options before you fall behind.
- Wait a little. Getting past the one-year mark, or the two-year mark, can change your tax bill.
Selling a House You Just Bought for Cash
Here is the honest truth: if you just bought a house in good shape, a cash buyer probably is not your best option. You have not had time to build much equity, and our offer may not cover what you owe. Listing it with a good agent will usually get you more, and we will tell you that.
If a straight cash offer will not cover what you owe, we can also look at creative financing, where we buy the house on terms instead of paying all cash up front. When it makes sense for you, that can get you out from under the house without bringing money to closing.
A cash sale can make sense if the house turned out to need big repairs, you need to sell fast, or you want to skip showings while you are already moving. Here is exactly how we figure out an offer. We work out what the house will be worth once it is fixed up. Our offer lands between 70% and 80% of that number, and that range has to cover both what we pay you and what we spend on the repairs.
No repairs, no commissions, and we pay all the closing costs. We can usually close in 10 to 14 days, or later if you need more time. Here is how the closing process works.
We buy across Hampton Roads: Virginia Beach, Norfolk, Chesapeake, Portsmouth, Suffolk, Hampton and Newport News.
Common Questions About Selling a House You Just Bought
Can I sell a house I just bought?
Yes. There is no law against it. Just check your mortgage’s move-in rules, know your selling costs and plan for any taxes on the profit.
How long should you own a house before selling?
Many people aim for at least two years. That usually lets you skip capital gains tax and gives you time to build some equity. Five years or more often works out even better.
Will I lose money if I sell my house after one year?
You might. With selling costs of 6% to 10% and little equity, many sellers break even or lose a little after one year unless prices went up.
Can I sell my house before living in it for a year?
Usually, yes, if your plans really changed. Your loan likely asked you to live there for a year, so talk to your lender if you are worried.
Does selling a house quickly hurt your credit?
No. Paying off the mortgage through a sale does not hurt your credit. Missing payments while the house is for sale can.
Sell a House You Just Bought for Cash
Call us at (757) 337-2236. We will look at your situation, give you a number within 24 hours, and tell you straight if listing, renting or waiting would work out better for you.