How Soon Can You Sell Your Portland Home After Buying It?

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Buying a home is a big investment, one of the biggest in life for most people. According to the Zillow Group Consumer Housing Trends Report (2022), the typical homeowner will stay in their home for 14 years before putting it on the market. This allows substantial equity growth and avoids financial loss through capital gains tax, mortgage prepayment penalties, and more. However, with the impact of COVID19, many homeowners are selling sooner rather than later. In 2019, the Zillow Group Consumer Housing Trends Report found that the average homeowner will stay in their home for 15 years, so the global pandemic effectively lowered the average by a full year. There are many unavoidable life circumstances that can suddenly force an unseen move, so it is good to understand the implications if you need to sell a home soon after buying it.

The 5-Year Rule of Thumb In Real Estate

Consensus in the real estate world is that a homebuyer will stay in a home for at least five years to avoid financial loss. This is the time in which the home will appreciate enough to break even on purchasing costs, like closing fees and real estate commissions.

5+ Years is Currently a Better Estimate for the Portland Area

In the Portland real estate market in particular, using our 2023 rent vs. buy calculations, a homeowner here is better off financially after five years and nine months than a renter. This is mostly due to high interest rates and home prices – driven by inflation and low inventory, respectively. However, if you are planning on staying in your home for at least a few years, it would be advantageous to buy. This is mostly due to rising rent prices in the Portland area. Also, federal law prohibits prepayment penalties on homeowner loans older than three years (this isn’t true for commercial loans).

Significant Tax Implications If You Sell A Home Before 2 Years

Selling the home you are living in before you’ve owned it for two years will mean paying capital gains tax. While the IRS allows single homeowners to exclude up to $250,000 of capital gains tax on real estate and married homeowners up to $500,000, this does not apply if you sell before you’ve owned and lived in your home for two years. There are some exceptions to this, so consult a financial advisor or tax expert before making any decisions. The tax rate could be up to 25%, combining state and federal taxes, but it will depend on your income tax bracket.

Serious Financial Obligations To Your Lender If You Sell a Home Before 1 Year (check for pre-payment penalties)

A lender cannot collect a pre-payment penalty greater than 3% of the amount of the outstanding loan balance, nor can a lender collect a pre-payment penalty after you’ve owned the home for three years. However, some lenders will have pre-payment penalties if you’re selling quickly. Check with your mortgage holder before selling within three years of ownership.

In addition, the tax implications can be even worse when selling under one year. Any home sold before the one-year mark is considered a short-term gain by the IRS. Short-term gains are taxed at short-term rates, which is equal to your income tax. Long-term gains (selling your home after one year) is high enough, but short-term rates can be even higher. Check with your CPA before selling a home within one year of purchasing.

Penalties and taxes on homes sold under one year after purchase can have an adverse affect on a person’s financial stability, but it depends on the amount of profit, and whether or not there is any pre-payment penalty at all. The risk may ultimately be worth it once you take these factors into consideration, but in most cases we would advise against selling your home in under one year if possible.

5 Reasons Homeowners Sell Sooner Than Planned, and How to Prepare for the Unexpected

Most people don’t plan to sell soon after buying a home unless their intention is to flip the property. In that case, increasing the gap between buying and selling is ideal. But despite the best laid plans, life happens. Unexpected events occur, and needs change, which can cause you to sell sooner than anticipated. Here are a few reasons why a buyer might become a seller sooner than expected, and how to avoid – or be more prepared for – the unexpected with your new home.

Buyer’s remorse. Maybe that dream home isn’t so dreamy once you’re living in it day in and day out. Or it could be that the neighborhood isn’t what you’d envisioned. An experienced real estate agent can work with you to help create confidence in your home purchase before you commit.

Job relocation. You move in, get settled, then land the perfect job. But it requires a long commute that isn’t possible due to transportation restrictions or family obligations. This is hard to prepare for. However, when you find that perfect home, you can factor proximity to your new home with your job search criteria. Happiness with your living situation can go a long way toward overall job satisfaction. 

Financial toll. Property taxes might increase or your household income takes a hit, both of which can force a sale. Unfortunately, neither of these are easily planned for. However, there are some insurance plans that cover the loss of a job or a reduction in income. It is important to note that you must have the insurance in place prior to the income change. Another proactive solution is to create a separate savings account dedicated to financial emergencies that could help to supplement lost income.

Health emergency. An unexpected and costly health situation might arise, leaving you with expensive medical bills. You may need to free up whatever equity you have in the home. As with a sudden change in finances, a health crisis cannot always be anticipated. Health insurance also offers options to offset unexpected financial costs. But you may not want to invest in this kind of insurance if you have other plans in place or are willing to sell your home. 

Family changes. Shifts in family size and circumstance—like gaining a new family member, seeing one off to college, or death—might cause you to sell and find a home more suitable for your needs. These can be mitigated by considering future possibilities and planning ahead. But unfortunately, some family transitions cannot be anticipated. This is why, as with the other scenarios above, it is wise to set aside a separate “emergency fund” for unexpected life changes (if possible).

A Hot Portland Seller’s Market Can Make It Easy To Sell A Home Fast

If you’ve increased the value on your property by adding new landscaping, completing a home renovation, or making bigger mortgage payments, you might decide to sell. Or if you’ve simply seen Portland home prices in your area continue to increase, then you might feel free to make a move with more than enough equity to do so. Read our article for more insight into home values across Portland.

Considering Selling Your Home Sooner Rather than Later?

Real estate prices are increasing in 2023. If your living situation isn’t what you want or need, now might be a good time to sell your home.

Considering the current lack of inventory in Portland, hungry buyers are looking for available homes to purchase.

Curious whether now is a good time to sell? Our top 1% seller’s agents would love to tour your home and give you advice about what’s best for you. Plus our real estate commission rates are reasonable and our marketing for our client’s homes is unbeatable. Contact us today!

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What My Clients Are Saying

Stephen made the experience of selling my first house seamless. I live in another state but he kept me informed and moved the process along without a hitch. The only thing another agent could have done differently was charge a much higher commission. I only wish he was able help me purchase in my state. Highly recommend his service and business model.