Can I Sell a House within 6 Months of Buying It?

Keep in mind that appreciation rates can change monthly. Many homeowners enjoyed a higher-than-normal appreciation rate in recent years as a result of the unusually hot pandemic-era seller’s market. Historically, houses in the U.S. typically only appreciate at an annual average of 3%–5%, according to data from the Federal Housing Finance Agency (FHFA) House Price Index. It’s difficult to predict appreciation rates in our current peculiar housing market.

California property investor Caleb Liu explains that there are two types of home appreciation:

• Natural appreciation: This type of appreciation is governed by forces in the market. “Under normal market conditions, natural appreciation cannot be controlled and is typically a few percentage points per year,” explains Liu. “Prices rise and fall month over month, and there is no guarantee that they will be higher in any given month compared to the previous month.”
• Forced appreciation: This can be triggered either through buying a property below market value and/or remodeling the property to sell for a higher price. “You can force some appreciation in a short amount of time by investing money into cosmetic upgrades, such as new paint and flooring,” says Liu. “But major remodels can take months and aren’t typically done on a short timetable.”

How does loan amortization factor in?

When you take out your mortgage, your lender will provide you with an amortization schedule that shows each monthly payment and how it’s broken down into principal and interest. The longer you stay in the home, the greater portion of the monthly payment goes toward the principal. That means if you sell within those first couple of years, you’ll likely have earned very little home equity as most of your payment went to the interest rather than the principal.

How can I estimate the cost of selling my home early?

Regardless of when you sell, there will be costs associated with the sale. The difference is that with a quick sale, the property hasn’t had much time to appreciate, which means the expenses could cut into (or even obliterate) any equity.

The typical costs associated with selling add up to about 9% to 10% of the sales price and include:

• Staging and house prep fees: 1% to 4% — though some agents will pay for staging depending on the situation
• The standard Realtor commission, which averages around 5.8% of the sale price, pending changes following the settlement of the NAR lawsuit
• Closing fees, which include title fees, transfer taxes, escrow fees, recording fees, and prorated property taxes: 1% to 3%
• Seller concessions: 2% to 6%
• Overlap costs: 1% to 2%

You’ll also need to factor in inspection and appraisal fees, moving and relocation costs, and mortgage payoff amount. To estimate the cost of selling your home, enter your information into HomeLight’s Net Proceeds Calculator.

Bill Samuel, a property investor and owner of Blue Ladder Development, offers up a real-world example: A home purchased in June of last year for $246,000 cost the buyer $5,145 in transaction fees (title, attorney, transfer stamps, etc.) with a total cost basis of $251,145. If the buyer then sells the property the following year, they should expect to pay about $15,000 in fees alone.

Will an early home sale cost me more in capital gains tax?

Even if you do experience a quick appreciation in property value, the capital gains tax could take a big chunk out of any potential profits. If you sell:

Less than a year after buying, you’ll have to pay a short-term capital gains tax, which is assessed on assets held for a year or less and taxed as ordinary income according to your tax bracket, which can range between 10% to 37%.

2024 short-term capital gains tax brackets.

Source: IRS.gov (Tax inflation adjustments)

For instance, if you purchased a property for $300,000 and sold it 10 months later for $370,000, your gain would be $70,000. If your regular income is taxed at a rate of 22%, that means you would have to pay 22% of the $70,000 gain, which would be $15,400.

More than a year after buying, but less than two years, any profits will be taxed at the lower long-term rate — either 0%, 15%, or 20%, based on your capital gains tax bracket.

2024 long-term capital gains tax brackets

Source: IRS.gov (Capital gains table)

At least two years after buying, you can deduct capital gains up to $250,000 for single homeowners and $500,000 for married homeowners filing jointly. You typically won’t have to pay capital gains taxes on that amount of your home sale profits.

To qualify for the capital gains tax exemption, you must meet certain conditions set by the IRS, such as you must have owned and occupied the property as your primary residence for at least two of the five years prior to its date of sale. In addition, the exemption is only available once every two years.

That means the longer you stay in the home, the less tax burden you’ll have to carry.

Consult With an Experienced Agent in Your Market

HomeLight’s free Agent Match tool can connect you with a top-performing agent who can help you make the best decisions about selling your home even if you have not lived there for as long as you had planned. Our data shows that the top 5% of agents across the U.S. sell homes for as much as 10% more than the average real estate agent.

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Can I sell my house within 6 months of buying it without losing money?

What about after one year? Or after two years? Let’s take a look.

When selling after six months, Liu says sellers should generally expect to lose money. That’s why, unless there is an extremely compelling or unavoidable reason, selling within six months should be avoided. “Depending on the underlying issue, the homeowner may consider renting out their home and moving into an apartment short-term,” Liu suggests. “While it is extra work, this will allow them to hold onto the property and avoid the expensive selling costs.”

When selling after one year, the seller could possibly break even if they’re in a fast-growing market that has seen strong appreciation. “In most situations, they’ll probably lose money when selling at the one-year mark,” Liu says.

When selling at the two-year mark, the biggest benefit is that you might qualify for the capital gains exemption if you lived in the home for at least two of the past five years before the sale. “While you will still incur selling costs, the tax-free appreciation after two years may be enough for you to at least break even,” says Liu. Be sure to consult with your tax professional to find out whether you’re eligible for the exemption.

How can I calculate my potential loss?

Every situation is different. To determine whether you might lose money — and how much — follow these steps:

1. Get an estimate of what your property is worth using a home value estimator. HomeLight’s Home Value Estimator walks you through a seven-question quiz to learn more about your home so we can provide the most accurate preliminary value estimate possible.
2. Deduct your outstanding mortgage balance (check with your loan servicer to find out the payoff amount, which could be different from the balance shown on your monthly statement).
3. Deduct any costs of selling, such as real estate commissions, closing costs, title fees, and any expenses to prepare the home.
4. If you come up with a positive number (potential profit), deduct any short-term or long-term capital gains taxes if selling before the two-year mark.

You can also try HomeLight’s free Net Proceeds Calculator to estimate the cost of selling your home and the net proceeds you could earn from the sale.

What should I tell buyers about why I am selling so soon?

Carroll has seen quick sales trigger questions on the buyer side — and generally speaking, she says the seller should leave the explanations up to the agent.

“In these cases, it’s important for the seller to let the agent handle communicating to buyers the reason for the quick sale,” she advises. “Sometimes the seller can say too much, or say the wrong things, and put the sale in jeopardy.”

Liu says it’s a delicate balancing act. “You don’t want to appear to be hiding anything, but at the same time, you don’t want to appear desperate to sell,” he says. “It’s best to strategize with your Realtor, but a short explanation such as a ‘family issue’ should suffice.”

At the end of the day, notes Liu, if you have a well-maintained home that is priced right for your market, buyers generally shouldn’t be too concerned about why it’s available.

To sell soon after purchase, or hold off?

While selling soon after buying does present the risk of giving up some equity, or even putting yourself in the red, it’s not always a recipe for financial disaster.

Depending on the market conditions where the home is located, Carroll says homeowners could actually benefit from selling soon after buying — particularly if they’re under 50 years old and have a lot of homeowning years ahead of them.

“Even if you end up losing $5,000 on a home, will that really have a big impact across the homeowner’s lifetime?” she asks. “If they get a good deal on the next house, what they lose on the sale, they could gain on their next purchase.”

In the end, it comes down to making the best decision for your life and your finances. But whether that means selling quickly after a purchase or holding onto the property and selling down the road, partnering with a top agent will typically net you more money than if you sold with an average agent or sold the home yourself. HomeLight can connect you with a top-rated agent in your market.

Header Image Source: (Michael Pierce / Unsplash)