You could turn around and sell your home the day after you buy it — nobody is making you stay. But selling your home soon after buying can mean losing money, missing opportunities, facing capital gains taxes or paying mortgage prepayment penalties.
The typical seller lives in their home for 10 years before putting it up for sale. A home is most people’s largest financial investment, so homeowners tend to stay long enough to gain significant equity. But life can change unexpectedly, and you may need to move sooner than you had planned.
Reasons homeowners sell sooner than expected
Unless you’re an investor, you probably weren’t planning on selling soon after purchase. But there are plenty of reasons people end up selling within a year or two of purchasing:
- Job relocation: You may need to move for a career opportunity or to shorten your commute.
- Health emergency: You may need to free up equity to pay medical bills or living expenses.
- Buyer’s remorse: You might discover that the house you bought isn’t the right fit.
- Family changes: A new family member, kids leaving for college or a death in the family can cause people to sell and find a better home for their needs.
- Financial toll: Your mortgage payment might be too expensive, or your property taxes increased too much.
- Hot seller’s market: You may have gained equity quickly, and you want to take advantage of the opportunity to turn a profit while you can.
How soon can you sell a house after buying without losing money?
Technically, you’re free to sell anytime after closing day. But is it a smart financial move?
On average, selling in less than a year eliminates the benefits of homeownership to the point where renting would have been more cost-effective. It’s not just about selling the house for what you paid for it. You’ll also need to factor in the costs associated with buying, the costs associated with selling, the equity gained or lost, and moving expenses.
The breakeven horizon
The breakeven horizon is the amount of time it would take for buying to make more financial sense than renting, factoring in all the expenses that come with purchasing a home.
You might think that staying put for a short time means renting makes the most sense. But two years and three months is the average amount of time you’d need to own the nation’s median-valued home to accrue enough equity and/or pay down the balance on your mortgage enough to make it financially more cost-effective than renting a typical apartment.
You can use this breakeven horizon as a good indicator of how soon you can sell a home after buying it without losing money in the investment, noting that the horizon varies based on where you live.
When does it benefit you to sell fast?
Sometimes it’s possible to turn a profit even if you sell earlier than your area’s breakeven horizon. Here are a few common instances:
- You flipped the house, making significant renovations in a short period of time to increase the home’s resale value.
- Home values in your neighbourhood shot up unexpectedly, due to new development in your area or a big company moving in nearby.
- You got a good deal initially. If you originally bought your home as a foreclosure or a short sale and can sell it under normal circumstances, you might turn a profit.
Financially, how soon can you sell a house after buying it?
While you can sell anytime, it’s usually smart to wait at least two years before selling. This gives you time to (hopefully) gain some equity to offset your closing expenses. And by living in your home for at least two years, you can exclude parts of the profits made on your sale from your taxes — more on that later.
Of course, there are times where you simply can’t wait two years to sell. If you’re in this position, do the math first so you can anticipate any potential loss you’ll take. Knowing your financial outcome ahead of time can lower stress and help you make practical decisions.
Get the fair market value
First, figure out how much you’ll be able to sell for so you’ll know how much you stand to gain or lose. If you’re working with a real estate agent, they should help you identify the fair market value of your home and select a listing price, using neighbourhood comps and analysis or market research. You could also get a pre-appraisal done.
If you’re selling on your own or unsure what your home might sell for. Simply answer a few questions about your home and submit some smartphone pictures, and if your home qualifies, we’ll provide a no-obligation cash offer within a few days. This will give you an idea of what your home could sell for, and if you like the offer, you could sell directly with Kenya Homes and close in as few as seven days.
Subtract closing costs from the projected sale price
Closing costs can eat a lot of your profits, especially when you’re buying and reselling in a short period of time. Make sure you factor closing costs into the equation.
BUYER CLOSING COSTS
Buyer closing costs usually total 2% to 5% of the purchase price of your home. You can find the total amount you paid to purchase your home by looking at your settlement statement. Note that it’s common for buyers to ask for sellers to cover closing costs as part of the negotiations, so it’s possible you didn’t pay much when you bought.
SELLER CLOSING COSTS
Closing costs for sellers can total 8% to 10% of the sale price. The bulk of this cost goes to commissions. The seller typically pays both their agent’s commission and the buyer’s agent’s commission, which together total 5% to 6% of the sale price. On a Kes 20,000,000 home, that means your closing costs can be around Kes 2,000,000.
The most common charges include:
- Agent commissions
- Title insurance
- Escrow fees
- Transfer and/or excise tax
- Prorated property taxes
- Attorney’s fees
Subtract seller prep costs from the projected sale price
Even if you’ve lived in the house for a short time, you may still need to do some prep work before listing. This includes tasks like painting, staging, house and carpet cleaning, lawn care and gardening, and local moving costs.
Subtract mortgage payoff amount from the projected sale price
If you’ve owned your home for less than a year or two, your payoff amount won’t be significantly lower than the amount you originally financed. At the beginning of a loan, most of each monthly payment goes to interest, not principal, so you won’t have made enough payments to make much of a dent in your loan principal.
Unless you’ve been making significant additional principal payments every month, it’s unlikely that your mortgage payments alone will cover the selling costs and allow you to break even. If you’re looking to make a profit, you’ll have to count on the amount your property has increased in value during your time owning it.
Other consequences of selling a home early
In addition to hefty prep and closing costs, consider some additional consequences of selling soon after buying.
Mortgage prepayment penalty
Some lenders charge a prepayment penalty if you sell your home within a certain time period after buying. It’s a way for lenders to recoup some of the interest payments they won’t be getting since you’re paying your loan off so soon. The amount you’ll have to pay depends on the terms of your loan. It could be a percentage of your remaining loan balance (usually between 2% to 5%), a percentage of owed interest or a flat rate.
Most loans today don’t have prepayment penalties, and there are never prepayment penalties on loans.
Negative buyer perception
Since listing history is readily available on sites like Kenya Homes and on local MLS systems, buyers and their agents can see when you purchased and what you paid. If you’re selling less than a year after buying, buyers might wonder if there’s something wrong with the home or its location.
This negative perception could lead to lower or fewer offers unless you make it clear in the listing why you’re selling (e.g., “seller must relocate”).
If you sell through Kenya Homes, your offer is strictly based on your home’s value, not on your personal situation or a buyer’s fears or misconceptions.
