What May Happen When You’re Selling a House After 1 Year?

✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home sellers.

No, it’s not favorable for you. If you sell a house any time before 2 years of purchase, you have to incur additional cost and higher taxes. You will be liable to pay short-term capital gains tax at 37%. Beyond tax implications, you will incur moving expenses (average $2,100) within the same year.

But if you’re selling a house after 1 year due to unforeseen career changes or family issues, you have some options to save money. You can sell your house within 1 year for cash or sell it through the MLS.

If you list on the MLS for a flat fee, you may get top-dollar offers from cash buyers and others. With a flat fee option, you can also save on listing agent commissions.

Strategies for Selling a House After 1 Year of Purchase

Sometimes you can’t avoid selling a house shortly after buying. Here are some strategies to make the best of such a situation:

Stage Your Home

If you stage your home, it may help you sell your house quickly after the purchase. You can earn enough profits to cover your moving and closing costs.

Sell on Alternative Platforms

If you want to sell your house before 2 years of purchase, sell it to “We Buy Houses for Cash” companies. You can receive quick cash offers and close the sale in less than 15 days. 

iBuyers companies also make cash offers on your home within 24 to 48 hours. You can close on your home sale within 7 days with iBuyers.

Find Your Home’s Equity

Before you decide to sell a home after 1 year, it must have some equity and value appreciation. A home’s value estimator can help you know how much is your house worth in advance.

With an estimator, you can ascertain if there is a noticeable value increase on your home. A comparative market analysis (CMA) report also gives a fair market valuation of your home.

With these ballpark figures, you can determine whether your home sale will be profitable or not.

Alternative to Sell Your House After 1 Year of Purchase

If you can’t wait for two years and have to sell it just after 1 year of purchase, you can rent the property out. The rental income will offset the mortgage cost.

This way, you can avoid short-term capital gains tax. If you sell the house after 2 years of ownership, you can qualify for long-term capital gains tax rates that are very low.

Disadvantages of Selling a House After 1 Year

You can legally sell your house the very next day of the purchase. However, there are financial and tax consequences which you may face:

1. You Have to Pay Short-Term Capital Gains Tax

If you sell your home before living in it for at least 2 years, you have to pay short-term capital gains taxes on property. The IRS treats STCG as an ordinary income and levies a higher tax rate of 37%.

2. You Have to Incur Mortgage Repayments

You may have to incur a loss on an early home sale. Your home equity may be less than the due mortgage amount. In the initial years, loan companies prioritize mortgage repayments toward the interest amount. Consequently, your principal repayments remains high.

For instance, a $300,000 mortgage has an EMI of $12,000 in the first year. The bank will adjust just $3,000 against the actual debt and $9,000 against the interest. It leaves you with a $297,000 loan balance.

Now, you have an outstanding mortgage balance of $297,000. Let’s say, your house value is only worth $200,000 to date. Here, you are $97,000 underwater and can’t recover your mortgage from the sale’s proceeds.

Your principal amount reduces at a slower rate, while interest rates balance out over 30-35 years

3. Moving and Other Costs

Moving houses again in a short time can cost you a lot. A major breakdown of the costs involved with selling looks like this:

Expenses Heads	Costs
Brokers’ Commissions	(5%-6% of the sale price)
Closing Fees: Title fees, transfer taxes, escrow fees, recording fees, and prorated property taxes	(1%-3% of the sale price)
Seller Concessions	(2%-6%)
Staging and House Prep Fees	(1%-4% of the sale price)
Inspection and Repair Fees	$300-$500
Moving and Relocation Costs	(varies)
Mortgage Payoff	(varies)

4. You May Face Adverse Market Conditions

If you sell a house before 2 years, you may not get desirable seller’s market. You may end up in a high-inventory market with low housing demand. Consequently, you won’t receive a desired price, or your house may get stuck for a long time on the market.

» Know if you’re in a buyer’s or seller’s market.

5. You Will Bear Cost of Buying

Whenever a property shifts hands, closing costs are involved. When you sell your house, you will have to consider the costs involved with buying a new house. Those costs will be additional to the closing costs of your present house.

How Soon Can You Sell a House After Buying It?

Minimum 2 years possession of a house will give you the most benefits. It lets your home gain more value. You can also cover its sales expenses and avoid extra taxes if you wait for longer times. 

You can also save on real estate commissions, closing costs, inspections, and other fees associated with selling. These costs add up to 9%-10% of the sale price. 

However, if you’re really in an unavoidable situation to sell the home that you just bought, you can try FSBO websites or sell your house as is for cash. You can list on the MLS for a flat feed. This cuts the 3% listing agent commission.

Houzeo can help you list your home both as FSBO and on the MLS for a flat fee.

Eager to Know How Houzeo Works?

We’ve got you covered. Check out how quick listing on the MLS works in 5 easy steps:

Need More Clarity? Read these exclusive Houzeo reviews and learn why it is one of the best FSBO sites in America.

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