Everything I’ve read in the little real estate magazine that comes with the Sunday paper says that you should own a house 3 years before you sell it, but I’ve never read what the consequences are of selling before those three years are up.
We bought a house (new construction) in January. We may need to sell it soon, due to job changes, etc. What would happen? Are we probably going to lose tens of thousands of dollars? Are we going to take a horrible tax hit?
Generally a house appreciates at a rate such that you should own the house at least 2 years to sell it and not lose money on the deal. This is because most people use a realtor to sell a house and most realtors collect a 6% fee on the sale that you pay. So if you buy a house for $100,000 and sell it 2 years later for $100,000, you are going to have to pay the realtor $6000 and be out $6000. If the house appreciates to $106,000 over the 2 year period, then you come out about even, (not considering money paid to the principle, but most 30 year loans don’t start paying significantly toward the principle for almost 10 years).
If you can successfully sell the house yourself, then it is a different matter, but make sure you get a lawyer to close the deal unless you are sure you know what you are doing. And don’t expect to sell the house quickly if you sell it yourself. Since you are moving this may be a big problem.
You don’t even have to notify the IRS unless the sale is over $250,000, or maybe it is if the selling price is more than $250,000 than the purchase price. It used to be you had a year and a half to rollover the money into another house but now the $250,000 rule applies. (Anyone able to help me with the exact details of what I am talking about on the $250,000 rule?)
You will lose the realtor fee, and if the selling price is lower than the original price you will lose the equity you have in the house of course. I can’t anwer about the tax hit, but again it is based on this $250,000 rule. That is all you should lose unless you have to make improvements/repairs before you can sell the house.
Also, your bank may charge you if you haven’t held the loan long enough. We just bought a new home, and the bank would charge a certain fee if we refinanced, or sold the home before a certain ammount of time had passed. You might want to check that out.
generally these rules of thumb are quite meaningless and useful only for people who don’t understand the rule of thumb anyway.
What it comes down to is this: purchasing and selling a house both have certain costs that are lost forever. If you sell and buy too often you would be better off renting. Where the break even point is for your case is too complex for any rule of thumb to be useful.
In some cases (contrary to what many people think) you may be better off renting even in the long term.
In some (exceptional) cases it might make sense to buy for a very short term.
Because of Sillicon Val, real estate prices are very high around there. $500,000 average in San Jose has just happened. But the thing with the average home price is that that is all it is. It doesn’t say what SIZE house that is. It could be 20 bedrooms, average.
So there is some trickle down into my area where house prices are up about 25% but then again, that does not say what size house. The only question lingering is why aren’t more people selling their houses is the houses are worth so much? Yep, very few for sale.
The price of houses actually drop in some areas. Anyone know any areas where this is happening?
Not in my area, a 3 bedroom, 2 bathroom house recently sold for just under $700,000. Yes, $700,000.