What do you do when “the one” isn’t the one? Sometimes plans change quickly and you have to sell your house after one year. It’s important to understand the process of selling your home after only living there for a short amount of time, just in case you must go through it.
Most Common Reasons for Selling Your House After One Year
Here are the most common (and sensible!) reasons that might make you sell your home very soon after purchasing it in the first place:
Sometimes what we want changes.
Perhaps the commute of 50-minutes with no traffic might have seemed like a fair trade for your “dream home” in the countryside, but the actual reality of it is proving a logistical nightmare.
Maybe the crime rate is significantly higher than you anticipated or discovered in your research and you don’t feel safe in your home.
Maybe the lack of public transportation in the area is impacting your ability to work and socialize.
The location of your home is important, as we select it for convenience and comfort. If it’s not working for you, it might be time to move on.
As mentioned, we pick our home’s location based on convenience. If you receive a job offer across town (or in another city!) that you can’t pass up, then it might be time to move sooner than you thought.
Whether it’s a new job in a new city, or a job loss that makes the current living situation unsustainable, a change in employment is the most common reason that people sell their homes again so soon after buying them.
If a family member falls ill, you might need to make a quick move to be closer to them for care. Or, on a happier note, if you have a new member on the way and need a little bit of elbow room, you might also need to move (and only have nine months to do so).
Aside from an employment change, most people who decide to move soon after purchasing their home do so because their family situation has changed drastically (and rather quickly!) from when they first moved in. These are the kinds of things that we can’t control, so it’s best to understand how the process works, so if it happens to you, you are prepared.
This last reason for buying and then selling immediately after is less common, but also the one that gives the buyer the most amount of agency. Unlike the other options, where outside factors like family and employment might force a homeowner’s hand into selling, a market change is a completely different opportunity.
This is because sometimes, and only sometimes, a market is so good that a home’s value appreciates so rapidly that if the owners were to sell ASAP, they would actually stand to make a profit from the deal. However, be sure to calculate your gains correctly. You will have to pay Realtor’s commissions, capital gains, and the normal closing costs. You’ll need to keep these in mind if you really want to come out on top financially.
Bad Reasons for Selling Your House After One Year
Sometimes you just change your mind.
Your new neighbors are noisy. You are doing renovations and feel a bit in over your head. Buyer’s remorse, especially after a purchase as big as a house, is a very real and common phenomenon. Because of this, it’s normal to have a little bit of a queasy feeling as you settle into the realities of homeownership.
It’s important to acknowledge this and work through it instead of panicking and bailing out. You can get to know your noisy neighbors and work through their nuisances. You can slow down the DIY renovations so that you don’t feel as overwhelmed, or even budget for a contractor to come in and help move things along.
There is always a solution if you take a step back and take your emotions out of it. If you truly cannot stay in your current home, then you need to think about the factors listed below and begin crafting your well-planned, non-emotional exit strategy.
What are the drawbacks of selling your house after one year?
There are not many positives to selling your home after only living in it for one year or less. Because of this, we will start out with this list of the challenges that you will need to work through during the sales process.
Closing Costs Loss
When a property changes hands, there are closing costs involved. Typically, the buyer pays the closing costs. When you sell your home after living in it for less than year, you don’t really have an opportunity to earn back the closing costs in home equity.
Then, as a seller, you are responsible for a few of the closing costs again on your own. You would need to pay the agent’s commission fees, title transfer fees, and prorated taxes and utilities.
Paying both of these closing costs nearly back to back definitely sets you up for a loss.
If you gain any sort of profit from selling the home after only a year of owning it, then you are going to have to pay taxes on the home at the capital gains tax rate. This is typically up to 20% of the profit, although this number depends heavily on your personal tax bracket.
If you’ve owned the home for less than a year, then you will have to pay an even higher capital gains rate. However, it’s very unlikely that if you hold onto a home for less than a year (unless you are an investor who has significantly improved a property’s appraised value), that you will turn any sort of profit. At this point, as the owner-occupier of a single-family home, you’re really just trying to minimize your losses.
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 logistics of moving house less than a year after moving in the first time can be daunting. Most moving companies don’t have a returning customer special, so the costs of hiring movers once again, as well as moving supplies (if you didn’t keep the originals) could be astronomical.
And that’s just the financial burden. The emotional and physical toll that moving after living somewhere for less than 12 months takes can be enormous.
Is there an alternative to selling your house after less than a year?
If you can afford it, both financially and logistically, a great option to avoid the losses of selling a home so soon after purchasing it is to simply become a landlord. If you keep your original home and rent it out, at least for a year or so, then there is a great possibility to 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.