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Selling a Home

How Soon Is Too Soon to Sell?

2022-07-01

The old adage of waiting at least two years before selling a home you’ve purchased may not hold water in today’s hot sales market.

According to the National Association of Realtors® (NAR), the median existing-home price for all housing types in March 2022 was $375,300, up 15.0% from March 2021. This marks the 121st consecutive month of year-over-year home price increases, the longest-running streak on record, says NAR.

With rosy forecasts like that coming out month after month, year after year, making a profit is on the minds of many new homeowners who may be on the fence about selling so soon after buying.

“We’re seeing a lot of people eager to sell even if they’ve been in the house for just a year or two,” notes Rob Greenbaum, chief sales officer with AMS. “And because prices of their homes keep rising, they can often recoup their investment and come out with a tidy profit.

Related: Preparing to Rent Out Your Home

Reasons to Sell Early

Some of the common instances in which it benefits you to sell within two years after buying are:

  • You made significant renovations in a short period that have drastically increased the home’s resale value.
  • The home values in your neighborhood have shot up unexpectedly due to area developments, such as new commercial areas or a big company moving in nearby. It could be an advantageous time to sell and make a tidy profit.
  • You got a good deal on the purchase initially, perhaps it was a foreclosure or short sale situation and you are now free and clear to sell the home for whatever price you’d like.

Related: How to Sell Your Home Quickly in Any Market

Running the Numbers

While each situation is unique, you’ll want to determine your “break even point,” which means you’ll walk away from the sale with a profit.

How? Start by researching list prices of comparable homes in your area and have a professional do a comparative market analysis or home evaluation. “To be competitive you’ll want to understand the market demand — are homes selling quickly or languishing,” says Greenbaum. “And you may want to visit a few open houses to understand the competition.”

Next, calculate the costs associated with selling. To avoid taking a loss, you’ll need to make back your down payment, closing costs, and the monthly mortgage payments you’ve already made. You’ll also want to make back the property taxes and the mortgage insurance you’ve been covering every month.

From there, you must calculate how much equity you’ve accrued and/or how much of your mortgage’s balance you’ve already paid down. This online calculator from Bankrate can help you determine these numbers.

While it will take most homeowners at least two years to reach break-even point, it’s not impossible in a market where home prices are rising so fast, to get there earlier, says Greenbaum.

Related: How to Thrive in a Low Inventory Market Whether You’re Buying or Selling

Consider This Before Deciding to Sell

While you can make a profit by selling soon after you’ve bought, there are some other things to consider and they may change your break even amount, he notes.

  • Capital gain taxes — If you’ve lived in your home for less than two years and its value has appreciated, you may need to pay 15% capital gain taxes on the profits. That could add up and you’ll need to make it part of your break even calculation. There are a few exceptions to capital gains taxes (for example, if you have to move due to a natural disaster), so you’ll want to consult a tax professional before putting your home on the market.
  • Mortgage prepayment penalty — Check your mortgage paperwork carefully to see if there will be a penalty for paying the mortgage off early. If you’re not sure, call your mortgage loan servicer (the company that collects your monthly mortgage payments). Although it’s becoming less and less common, some lenders write these penalties into your loan paperwork because a premature sale means they’ll miss out on interest payments you would have paid them for years to come. The penalty they typically charge you for pre-paying the mortgage is 2%-5% of the remaining balance on your loan.
  • You’ll need to move somewhere — In many markets houses are selling fast — sometimes the same day they’re listed. If your home sells quickly, and the contract will close in 30-45 days or so, you’ll need to know where you are moving to. Are you buying a home? Have you made a contingent offer? Will you be relocating or maybe renting for now? You’ll want to have some plan in mind in case your home sells fast. Another option if the buyer is agreeable is to rent back from the buyer until you can move. Of course, not every buyer will agree.

We’re Here to Help

Whether you’re just thinking about buying, ready to start home-shopping in earnest, or thinking about refinancing, a Military Mortgage Advisor will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of low-rate and low-cost mortgages designed to meet your needs.

Ensuring AAFMAA Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-244-0564!