When you first bought your home, you likely thought it would be a long-term investment. However, certain issues may have come up. You may have lost your job or your finances have changed significantly and you’re unable to cover the costs of the mortgage payments. Or you may have found that the house you bought has too many problems.
You might wonder, “Can I sell my house after 1 year?” The answer is that this is possible, but you may find that a home sale after 1 year could lead you to lose money. For example, closing costs are about 10 percent of the overall sale price.
So, if you can wait at least two years or more after buying your home before selling it, you’ll gain much more financially than if you sold your house after one year.
Yet, if you need to sell your home due to financial or health reasons, a job relocation, or because a natural disaster destroyed part of the property, you’ll find that the answer to the question, “Can I sell my house after 1 year?” is a clear yes.
However, there are specific steps you’ll need to take to pay off your mortgage, closing costs, and other fees.
In this guide, you will learn about the costs associated with selling your Idaho home after a year including information on closing costs, property sale taxes, and the benefits of house flipping. Now, let’s get started!
How to Sell Your House After 1 Year in Idaho
If you’re trying to sell your place after 1 year in Idaho, you will need to consider real estate agent commissions. As such, you should try to work with a company that charges low realtor fees and commission fees.
So, can I sell my house after 1 year in Idaho? You’ll find that there are major costs and disadvantages to take when selling your home after one year. These include:
- Limited market appreciation
- Capital gains taxes
- Closing costs
- Negative views among home buyers
If you have sold your home in a year or less and made a profit on that sale, then you’ll have to pay capital gains tax. Short-term capital gains are taxed as a form of income and you will pay the same federal tax rate as that of your household income tax, which tends to range from 10 to 37 percent. This cost depends on your tax bracket.
Costs of Selling Your House After a Year in Idaho
Closing costs tend to have a major impact on the overall profit you can make from the value of your home sale. On average, the seller closing costs tend to range between 8 and 10 percent of the total home sale price after accounting for the real estate agent commission fees.
Furthermore, you’ll need to cover the selling costs of the realtor’s commission and then pay off your mortgage. When undergoing escrow, you’ll receive a mortgage payoff statement from your lender when you’re selling a home a year after purchase.
Once you finish paying off the remaining mortgage balance after the sale, the escrow agent will send the balance to your lender and that will close out your loan.
You may also need to cover the costs of a staging professional who will make your house look great to potential buyers. In addition, if your place needs renovations, you’ll likely need to hire a handyman and spend the money needed to fix up or remodel your house.
Lastly, you’ll need to cover the price of property taxes related to the sale including the capital gains tax.
Property Selling Taxes
The biggest property selling tax you’ll need to consider when selling your home after one year of residence is the long-term capital gains tax. If you’ve lived in your place for less than one year, then you’ll need to pay a short-term capital gains tax.
In addition, the short-term or long-term capital gains tax will only impact you if you sell your property for more than what you paid for it in the first place. You’ll need to report to the IRS any gains you made on the sale when paying your tax bill in April.
Capital Gains Tax
The capital gains tax rates will depend on your particular tax bracket, whether the property was an investment or your main place of residence, and the length of time you’ve owned the place. Married couples also have a different tax rate as compared to single homeowners.
If you sell a place less than one year after purchase, short-term capital gains are taxed as ordinary income. A long-term capital gains tax for properties owned more than one year is taxed at 15 percent or 20 percent depending on one’s tax bracket. You may want to ask a tax professional for assistance with paying these costs.
The Breakeven Target
You should find your target to break even upon the sale of your home. A break-even price is the amount of money you will need to cover the costs of buying and owning an asset including a home. If you have a breakeven target for the sale of your home, the sale price will need to cover:
- Mortgage payments
- Closing costs
- The interest payments related to the mortgage
- Hazard insurance
- Property taxes
- Maintenance, upgrades, and renovations
- Real estate commission price
Essentially, the breakeven target consists of having no financial losses as well as no profits from the home sale. If you reach this target, you could save thousands of dollars when selling a house after a year of ownership.
Closing Costs When Selling a House
Closing costs are lower for homebuyers than for sellers. As a buyer, you likely covered 3 to 5 percent of closing costs. However, the seller is responsible for 6 percent of real estate commissions and up to 3 percent in other closing costs, which include pro-rated property taxes and transfer taxes.
As such, the average closing costs when selling a house are usually about 10 percent of your home’s overall sale price. Due to the closing costs, you are more likely to lose money on the overall sale when selling your place after a year.
Is It Worthwhile to Sell a House After 1 Year in the First Place?
There are factors why selling a house after one year is not the best idea. For instance, you’ll need to consider the issues related to covering closing costs, capital gains taxes, little market appreciation on the property, and fewer buyers interested in a property you’re selling so quickly.
However, you may at least avoid the capital gains tax and get a tax liability exclusion if you can prove a job relocation, divorce, a death in the household, job loss, property destruction, and chronic medical conditions.
Reasons Why You Might Sell A House After 1 Year
The main reasons why you may want to sell a house after one year of owning it include:
- Disliking the home and finding structural problems after the purchase
- Disliking the neighborhood and potentially finding the crime rate is higher than originally thought
- Family-based changes including a growing family or a death in the household
- Job relocations or job loss
- Needing to relocate to be closer to ailing family members
- Beneficial real estate market changes
- House renovation and the desire to flip the home
Market appreciation details how well an asset like a property fared the economic ups and downs over a particular period, such as five or 10 years. As such, when selling a property after only one year, you will likely see limited market appreciation.
Market appreciation can be thought of as asset growth or an increase in value. Real estate market appreciation occurs due to economic fluctuations and other processes that impact market conditions.
You Can’t Afford to Keep Your Home
A very important reason why someone may need to sell their house after one year of ownership is due to the inability to afford to keep the home. This may occur due to a job loss or other major financial loss that leaves you unable to pay off your mortgage.
House Flipping has Forced Appreciation
After repairing and renovating a house that you bought for cheap, you can act as a house flipper and sell the place. This process of house flipping brings forced appreciation to your property.
If you are looking to sell your place after one year, you’ll need to consider how to cover the mortgage, closing costs, and property selling taxes like the capital gains tax. However, if you remodel your property, you may want to flip your home for a higher price. In such a case, contact a cash home buying company today.