Sometimes, despite all our efforts, even our best made plans don’t pan out the way we want them to. If you’ve recently moved into a new home and need to move after living there for less than a year, you’ll need to be aware of the financial implications of selling so soon.
When most people buy a new home, they plan to build a new a life for themselves there. But what do you do when “the one” isn’t the one?
Unfortunately, selling a house after only owning it for a year can have some nasty financial implications: you'll need to pay capital gains tax if you made any profit, and you'll get hit with another round of closing costs within a single year.
There's also the hassle of having to prepare the house for sale, pack up, and move — right when you were just starting to get settled in...
That said, as long as you haven't seriously damaged your home since you moved in, re-selling your property after living there for a year shouldn’t be too difficult — especially if you work with an experienced real estate agent.
If you’re considering selling your recently purchased home, Clever can help!
We partner with top-rated, local real estate agents across the country who will list and sell your home for a heavily reduced flat fee — that's some much needed financial relief in the midst of back-to-back real estate transactions!
> Get in touch to learn more and connect with a top-rated agent near you for a no-obligation consultation.
In the meantime, here’s everything you need to know about selling your house less than a year after purchasing it.
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Top 4 Reasons for Selling Your House After One Year
Whether it's your first home or your third home, there are many reasons why you may want to sell your home after just one year. Here are a few of the most common ones:
1. Job Change
Whether for better or for worse, sometimes the job you planned on having when you moved into your new home just doesn't pan out.
In some cases, that could mean you got a new job and need to relocate, while in others it could mean you've been laid off and know that you won't be able to make your mortgage payments.
Whatever the reason, when your employment status changes, so do your personal finances, and you may be forced to move even if you've barely spent any time in your home.
2. Family Reasons
If a family member falls ill, you might need to make a quick move to help provide care for them.
Or, on a lighter note, you may have a new family member on the way and need a little bit more elbow room.
After employment changes, family is the most common reason that people move after only having lived in their home for a short period of time.
These kinds of unforeseen circumstances can make it necessary to put your home up for sale and find a new house.
Sell your recently purchased home with a top agent!
List with Clever, get a great offer fast, save thousands on commission.
3. Bad Location
Sometimes what we want changes. Perhaps the idea of a two-hour commute seemed like a fair trade for your “dream home” in the countryside, but the reality of it is proving to be a logistical nightmare.
Perhaps someone broke into your home, and you no longer feel safe there, or maybe the lack of public transportation in the area is impacting your ability to work and socialize.
No matter the specifics, the location of your home is important. If you feel like it’s not working for you after living there for a while, it might be time to move on.
4. Market Change
In some cases, the local real estate market is so hot that a home’s value will go through the roof in just a single year.
In these types of housing markets, selling your home for a profit and moving somewhere else can make a lot of sense financially.
However, be sure to calculate your estimated gains correctly: you will have to factor in commission fees, capital gains tax, and the normal closing costs.
Bad Reasons for Selling Your House After One Year
Cold feet and buyer’s remorse, especially after making a purchase as big as a house, are very real and common phenomena.
It’s totally normal to have a bit of a queasy feeling as you settle into the realities of homeownership.
However, it’s often a good idea to acknowledge this and work through it instead of panicking and bailing out.
While some circumstances are out of your control, there are some that you can take into your own hands.
For example, if you have noisy neighbors, you can try to get to know them and work out your problems with them.
If you're feeling overwhelmed by the renovations or repairs you're doing, you can slow down or budget for a contractor who can help move things along.
There is usually a solution if you take a step back and look for one. However, if you've thought it over and you truly cannot stay in your current home, then it's time to start crafting your exit strategy.
What Are the Drawbacks to Selling Your House After One Year?
For the most part, the challenges you'll face when attempting to sell your home after just one year will be financial. Let's take a look at some of them.
1. Closing Costs
When a property changes hands, there are closing costs involved. When you bought your home, you likely had to pay for the closing costs.
Usually, you can earn back those costs in home equity over time, but if you're selling your home after just a year, you won't have built up enough equity to cover the losses.
As a seller, you'll also be responsible for some of the closing costs again, specifically the buyer's and listing agents’ commission fees, title transfer fees, and prorated taxes and utilities.
Paying two rounds of closing costs nearly back-to-back can be difficult for many homeowners.
2. Tax Implications
How long you live in a home can have a major impact on the amount of taxes you'll have to pay when it comes time to sell it.
For example, if you're single and the home you're selling has been your primary residence for two out of the last five years, the first $250,000 of profit from your home sale are completely tax-free. If you're married, this amount goes up to $500,000.
Unfortunately, if you've only been living in your home for one year, you can't benefit from those tax breaks.
You will also be subjected to higher tax rates: no matter whether you're profiting from stocks, bonds, or real estate, the tax rate on short-term capital gains (assets held for less than a year) is higher than the rate for long term capital gains.
However, unless you're an investor, it's very unlikely that you'll turn any significant profit within such a short period of time, so with any luck, your tax burden will be minimal.
Think about it this way: if you’re not selling because of rapid market appreciation, then even if your home appreciated just a little bit in the short amount of time that you owned it, that “profit” is likely to be swallowed by the 6% commission you have to give your agent on closing day.
The rate at which your profits will be taxed depends on your tax bracket, so it's a good idea to consult with a tax specialist to make sure you're budgeting correctly. If you're in the highest bracket, you could pay up to 20% in taxes.
3. Moving Implications
The logistics of moving again after less than a year after can be daunting. Most moving companies don’t have a returning customer special, so the cost of hiring movers once again can be difficult to stomach.
What's more: The emotional and physical toll that moving after only living somewhere for less than 12 months takes can be enormous. This is a decision that shouldn't be taken lightly.
Alternatives to Selling Your House After Less Than a Year
If you can afford it, a great option to help avoid the losses associated with selling a home so soon after purchasing it is to rent it out.
If you keep your original home, move into a new principal residence, and find some renters, you can recoup some of the costs from your initial purchase.
Not only that, but you can also earn a nice passive income from being a landlord.
That said, keeping your renters happy and writing up lease agreements does require a bit of real estate know how, but it's nothing you can't learn if you're motivated.
No matter what you decide in the end, if you're considering selling your home after a year or less of ownership, it's important to get in touch with an experienced real estate agent who can help guide you through the home selling process.
Whether this is your first time selling a home, or you're already an experienced home seller, finding a great real estate agent is an important piece of the puzzle.
Your agent will help you price and market your home, ensuring you get an offer quickly and for top dollar.
What’s more, when you list with Clever, you’ll not only work with a top-rated, full-service agent in your area — you’ll also save thousands on commission, helping to ease the financial burden of back-to-back real estate transactions.
Clever connects you with top-rated, local agents from major brands or regional brokerages (Keller Williams, RE/MAX, Century 21, etc.) These agents have agreed to work for a flat fee of $3,000 — or 1% if your home sells for more than $350,000.
As of 2019, sellers who listed with Clever saved an average of $10,000 per transaction.
Want to learn more? Get in touch! Fill out this form and one of our representatives will reach out to answer your questions and connect you with one of our Partner Agents in your area.
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Top FAQs About Selling Your House After One Year
1. Can I sell my house after 1 year?
Yes. There are no restrictions on how long you need to own a house before selling it.
2. What happens if I sell my house after 1 year?
In most cases, the only difference between selling a house after only one year and selling a house after a longer period of time is the amount of tax that you will pay. Your profits will be taxed at the higher short-term tax rate, and you won't get any tax breaks.
3. How long should you live in a house before you sell it?
To minimize your tax exposure, it is best to live in your house for at least two years. If you're single and have lived in the home for two out of the last five years, the first $250,000 of profit is tax-free. This amount is raised to $500,000 for married couples.
4. What is the best month to sell a house?
In most of the US, May is the best time to sell a house. To learn more about timing the market, be sure to read our article on the topic here.
5. How do I avoid paying taxes when I sell my house?
To minimize your tax exposure, you'll need to have lived in your home for two out of the last five years. Singles who meet this criterion can take $250,000 of profit tax-free. This amount is doubled for married couples.