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I just purchased a home on 12/15/06. I plan to move across town when we are ready to settle down (have a baby therefore seeking a better school district) which we hope will be in the next year or two….what are the pitfalls of selling a house within a two year time frame…? A friend mentioned you have to wait two years so you don’t get hit with tax issues…ANY help would be greatly appreciated!

6 Thoughts on How long do you have to wait before you can sell your house?
  1. Reply
    July 18, 2011 at 3:22 am

    Call your Realtor people and your tax person and ask.

  2. Reply
    July 18, 2011 at 4:19 am

    Selling your home before the two year mark will result in having to pay taxes on any money you make off of the sell. However, you probably won’t recoup much money from the sell since the majority of your monthly payment is probably going to interest anyway. If you don’t see making a large profit from the sell of your home, then go for it. Just hang onto the extra money so you that you have the money available at tax time. One thing to remember though, it may take some time to sell your home, so consult a real estate agent to see how the housing market is in your area to determine when you should list your house.

  3. Reply
    July 18, 2011 at 5:04 am

    You can sell your home immediately if you so chose. Check your mortgage for any pre-pay penalties to see if that will affect you financially. If you wait two years, you can exclude $ 250K single ($ 500K married) of capital gains if there are any. The likely hood of selling a home in such a short period of time and not losing money due to the costs associated with the sale are dependent upon your location and the appreciation of homes in that area. Best of luck..

  4. Reply
    Mr. Burns
    July 18, 2011 at 5:07 am

    You can sell right after the close of escrow. The federal rules require you live in your home 2 out of the last five years to exclude the gains from taxes. The capital gain taxes are probably 15% of your net gain, but it is unlikely you will have much of gain after two years. A rought estimate is 92% of what you think the house will be worth and then deduct your original purchase price and there is your gain. When you sell a home there are a ton of associated costs, broker fees, escrow fees, title insurance and on and on and on they amount to about 8% of the sales price. Home prices have flattened out, so it is unlikely that you will have a gain in one to 2 years. It usually takes around five years to have a decent gain. I would suggest you pay an extra $ 100 or more per month and say so in your payment to reduce the principal and get your requity growing faster.

  5. Reply
    stella m
    July 18, 2011 at 5:22 am

    Congratulations on your new home! You are of course free to sell your house as soon as your deed was recorded, usually within a week or two of closing. However, there are several financial considerations:

    Your friend is referring to the capital gains tax law – if you live in a residence for two years or more, you don’t have to pay capital gains tax (currently 15%) on any clear profit you make up to $ 250,000 single or $ 500,000 married. However, since the housing market no longer is showing double-digit price increases, this may not be a real concern. I would discuss this with the realtor that sold you your house.

    The other consideration is your mortgage. You might want to check and see if there’s a pre-payment penalty. Some mortgages require you to pay six months or so of interest if you pay off the entire balance in the first few years (as you would if you sold your home). Basically that works out to about six mortgage payments; however not all mortgages contain a pre-payment penalty. They’re more common with adjustable rate loans and there should be a page in your documents that gives the prepayment terms, if there are any.

    The other mortgage consideration is closing costs and the realtor’s commission if you use one when you sell. Your current loan documents will give you a good idea of what the closing costs could be, and the average realtor’s commission is 6%.

    Keep an eye on home prices in your area and you’ll start to get an idea of how the market is behaving and when might be a good time to sell to maximize your profit or minimize your loss.

  6. Reply
    July 18, 2011 at 5:50 am

    Depends on how u bought the house. If it was bond money u have to generally wait up to 9 years. Other financing methods make you wait a year. Your mortgage agent can tell you if there is a restriction.

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