How Soon Can You Sell Your Portland Home After Buying It?
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, the typical homeowner will stay in their home for 15 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 (just after that report was written) many homeowners are selling sooner rather than later. Also, many unavoidable life circumstances can suddenly force an unseen move, so it is good to know 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.
3-Years Is More Than Enough In Portland
In the Portland real estate market in particular, using our 2021 rent vs. buy calculations, a homeowner here is better off financially in three years over a renter. Also, federal law prohibits prepayment penalties on loans older than three years.
Significant Tax Implications If You Sell A Home Before 2 Years
Selling the home your 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.
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 quick. 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.
5 Reasons Homeowners Sell Sooner Than Planned
Most people don’t plan to sell soon after buying a home unless their intention is to flip the property. Lessening 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.
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.
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.
Financial toll. Property taxes might increase or your household income takes a hit, both of which can force a sale.
Health emergency. An unexpected and costly health situation might arise, leaving you with expensive medical bills. You might need to free up whatever equity you have in the 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.
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 explode, then you might feel free to make a move with more than enough equity to do so. See our recent article, Where in Portland Home Prices Have Risen the Fastest.
Considering Selling Your Home Sooner Rather than Later?
Real estate prices are increasing in 2021. If your living situation isn’t what you want or need, now might be a good time to sell your home.
Considering the current slump in new home construction in Portland, hungry buyers are looking for already existing homes.
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 the marketing of our client’s homes is unbeatable. Contact us today!October 1, 2021