Posted On September 05, 2019
The home you buy today is not always going to be the home you live in forever. Sometimes the need to move may come sooner than you expect. Most real estate professionals recommend waiting at least five years after buying a home before selling it to make sure you recoup the cost of the home purchase. However, circumstances vary, and in some cases, you could benefit from selling your home sooner rather than later. Realtor.com contributor, Larissa Runkle, identified three times when you should break the “5-year rule.”
Your home’s value increases rapidly.
Many markets around the country have been experiencing rapid home price appreciation, and the neighborhood in which you buy could turn into one of those white-hot markets. If that’s the case, you could sell your home and not only cover the costs of its purchase, but profit from the sale. This move only makes sense if you are relocating to another area. Selling and buying in the same rapidly appreciating market could leave you at a loss.
The neighborhood quality is declining.
Maybe it’s just started to go downhill or maybe you didn’t do enough research before you bought your home, but the quality of your neighborhood can decline for a number of reasons. In some cases, the construction of unwanted dense commercial or industrial facilities can lead to an increase in crime, or local schools or stores may close down. If your neighborhood is going downhill, you may not be able to recoup what you paid for your home, but it’s better to get out now rather than wait until the market is saturated with numerous, comparable properties.
You bought more than you bargained for.
It’s important to do your research before buying a home, but sometimes you make a mistake, it happens to everyone! Maybe you underestimated how much work your fixer upper needed or maybe you thought you could keep up with the maintenance and you can’t. You may have also had a change in your income and can no longer afford the mortgage payment, or the homeowner’s insurance or homeowner’s association fee has become too much to absorb. Before you find yourself missing a mortgage payment, consider selling the property and taking the loss. An initial loss now is way better than the lasting credit damage of missed mortgage payments or worse, foreclosure.
Everyone’s circumstance is unique, and there may be a time when you have to sell a home shortly after buying it. Before selling your home, keep in mind that when you sell a home you have owned for less than a year, any equity you’ve accumulated will be subject to a taxation as would any other source of income. Be prepared to cover this short-term capital gains tax.
Working with a trusted mortgage lender and real estate team is the best way to avoid making a mistake when you buy a home. Buying a home requires research, not just into the property but into the surrounding area. Experienced, local real estate professionals will be able to predict how your home’s value will increase and how the surrounding neighborhood is doing.