Although becoming a homeowner is an investment in the future, it can come with some financial challenges. Changing home values, property taxes, interest rates, insurance costs, and many other factors can affect your budget when you own a home. These hidden costs are often surprising to first-time buyers. Unforeseen circumstances could force you to sell a home early.
Most people buy homes for the long term, but some situations can lead homeowners to sell their homes after just a year. Let’s discuss how the home-selling process might play out when you have only owned the property for a year.
Traditional Listing and Selling Timeline
There are several house selling strategies, but most homeowners will pursue traditional sales. In this process, you publicly list your home with a real estate agent, prepare the home for showings and open houses, negotiate buyer offers, and then close on a deal.
Selling your house can take several weeks in the best circumstances, but it could also drag on for months if buyers are not interested in your property immediately.
Factors Affecting Time to Sell
Numerous factors will influence the timeline for selling your home. If you plan to sell a house, research these elements to understand how long it may take to complete the transaction so you can prepare. Here are some factors to consider when selling your house.
Market Conditions
One of the driving factors behind the time it takes to close is the local housing market. If the local market benefits sellers, there are many interested buyers, and you can secure multiple offers immediately. In a buyer’s market, there are too many sellers, so buyers have the power to wait for prices to drop. This could increase the amount of time required to sell your house.
Research the local market to determine its condition and how that may affect your timeline.
Property Condition and Pricing
Well-maintained homes that are priced fairly sell faster. If you are trying to squeeze as much money as possible from the property with a higher purchase price, it could take longer to receive an offer from a buyer. Likewise, if you lower the home’s sale price, you will likely attract many offers. However, if the house is in poor condition, this could slow down the timeline.
Location and Demand
The location of your home will also affect how long it takes to sell. Desirable locations in high-demand areas will quickly attract numerous offers. A comparative market analysis of comparable properties is crucial if you live in the middle of nowhere or far from shopping centers and community services.
Consider the real estate demand for a home in your location when determining the total sale price.
Selling Your House After a Year: Yes or No?
Is it worth selling a house you have only owned for a year? In many cases, it is the only option due to life circumstances. Perhaps you got a job in a different location or are facing financial trouble and cannot afford mortgage payments or the tax bill. Whatever the reason for selling your house quickly, here are some considerations.
No Legal Restrictions
For the most part, there are no legal regulations for when you can sell your house. Once you secure a mortgage and start making payments, you are considered the owner of that house, which means you can mostly do what you want with it. Legally, you have every right to sell your property, including your principal residence, whenever you like.
Potential Financial Impacts
The primary reason to avoid such a short period of ownership is to protect your finances. Unless you are forced to move due to challenging circumstances, selling a home after just a year will significantly impact your finances. Here are some consequences of selling a house with this timeline.
Closing Costs
When you secure a deal for your home, there will be significant selling expenses. Typical selling fees in a real estate transaction include title insurance, transfer taxes, real estate agent commission fees, and attorney fees. Seller closing costs typically fall in the 5-10% range for the home’s sales price.
After only owning the property for a year, these selling costs could be difficult to cover with the profits, and you may lose money on the deal. Typically, a seller pays closing costs, and they come out of the net profit.
Capital Gains Taxes
It’s crucial to understand the term capital gains tax. Capital gains taxes often come into play when selling property. If you purchase an asset and sell it for a profit, you may have to pay capital gains taxes. Usually, you can obtain a capital gains tax exemption if you have owned the house for over two years or purchased another property with the proceeds.
However, selling the house early may force you to pay a short-term capital gains tax. A significant portion of your profits can go to costly capital gains taxes, moving costs, and other closing costs. If the sale of your primary residence isn’t enough to cover the cost, you may have to pay them out of your ordinary income.
The capital gains tax rate for a short-term asset typically falls between 10% and 37%, while long-term capital gains are taxed at 0%, 15%, or 20%. A tax professional can help you determine if you have enough equity to pay for tax and ensure you avoid a penalty.
Mortgage Payoff Penalties
Lenders assume a lot of risk when they give out mortgage loans to homebuyers. Most lenders will include mortgage prepayment penalties in their loan contracts to de-incentivize short ownership periods. If you own the home for a year and decide to sell it, you will likely pay a mortgage prepayment penalty to the lender.
Real Estate Agent Commissions
Real estate agents charge commission rates for their services. When the home is sold, the seller typically pays both agents involved in the transaction. Most commission rates fall between 5-6% of the cost of the home, but a top real estate agent may charge even more, cutting further into your already minimal profits.
Reasons to Sell a House Quickly
Selling a house in less than a year can be complicated, but it may be unavoidable for some sellers. Often, these sales occur due to unforeseen changes in the seller’s life. Here are some reasons why you may choose to sell a house after less than a year of ownership.
Life Changes and Unexpected Circumstances
Most people purchase a primary residence, intending to stay there for a while. Selling the house after one year typically occurs only because of difficult situations or lifestyle changes. Some common reasons for quick sales include job relocations, financial hardship, divorce, unwanted inheritances, or impending foreclosures.
The Need for a Fast and Flexible Solution
Traditional sales are not the best solution if you need to sell the property fast. This process could take months, and a faster solution may be necessary. In a financial sense, you may need money from the sale as quickly as possible, so you should consider selling to a cash home buyer.
Benefits of Selling to a Cash Home Buyer
Cash home buyers are typically investment firms that keep funds on hand to purchase homes. If you are selling after just a year of homeownership and trying to get as much cash as possible, a cash buyer is a viable option for numerous reasons.
Speed and Convenience
Speed is essential if your home sale happens due to divorce, job relocation, or impending foreclosure. A traditional sale will not get the job done in time. A cash home buyer will have the funds to buy your home immediately without worrying about financing delays. Plus, you don’t have to worry about spending time or money on repairs or preparing for house showings.
These firms typically offer as-is purchases, so the condition of your home is irrelevant.
Flexibility and Control
Selling to a cash buyer gives you more control over the home sale process. They offer flexible closing dates since there are no financing contingencies. Many cash buyers will also cover closing costs to make the transition easier. Cash offers may be below fair market value, but this ensures you avoid paying a capital gains tax rate.
Selling your house after one year is far more appealing if you find a qualified cash home buyer.
Addressing Concerns About Selling Quickly
The main concerns about selling your home after a year are related to financial consequences. Although you may make little from the deal, the speed and convenience of a cash buyer is often reason enough to pursue this transaction.
Before choosing to sell the property this quickly, consider all your options and weigh the benefits of each. In certain situations, selling to a cash home buyer is the best option.
The Bottom Line
Legally, you can sell a home you own at any time. However, there may be financial ramifications, such as a short-term capital gain tax, closing costs, prepayment penalties, and other tax implications. You may have to pay prorated property taxes or transaction costs to purchase another property.
Some sellers have no choice due to life circumstances. If speed and control over the sales process are necessary, you can sell to A-List Properties. We will make a fair cash offer for your home, minimizing stress. Call us today at 972-526-7042 or complete the online form to request a cash offer.
Zach Shelley
Zach Shelley is a seasoned real estate investor with a diverse network spanning across the nation. As the founder of his own real estate venture, Zach is committed to offering innovative solutions to homeowners facing various real estate challenges.. Through his dedication and strategic approach, Zach continues to make a significant impact in the real estate industry, providing homeowners with alternative pathways to navigate their property transactions.
