Have you decided to move and sell your new home? Do you live in Texas and want to move after just one year? You might have found a new job that requires relocation, or you may just hate your neighbors. Whatever the reason, plenty of people – especially house flippers – buy and resell properties within a short period.
If you sell the house after one year, you may find that your mortgage is too challenging to keep up with, especially if you have lost a source of income. When you sell a house after one year, you will need to understand the costs involved, including the closing costs, taxes, and market appreciation.
Keep reading the guide below to learn all about these factors and have all your questions answered. Before you know it, you’ll successfully sell your new home.
Costs of Selling Your House After a Year in Texas
You may find that selling a house after one year could be financially beneficial for you and your family. For example, you may have bought a more affordable home that you wanted to renovate. Now that you’ve updated the home, you may realize that you could make a nice profit by selling it at a higher sale price and moving somewhere else.
Are you in the midst of a great seller’s market? Or did you hear from a real estate agent that there’s a huge housing market appreciation right now? There may be financial incentives to sell your house after one year. You might find cash home buyers in Dallas or work with companies that buy houses in Arlington.
However, there are also costs of selling a Texas home after one year, such as:
- Property selling taxes (otherwise known as capital gains taxes)
- Closing costs
- Moving costs
- Losses due to mortgage interest rates
Property Selling Taxes
Let’s dive into what property taxes you will face when selling your Texas home within one year after purchase. First, the state of Texas has some of the most expensive property taxes, which you’re responsible for while still owning your home. Homeowners in Texas pay an average of $3,327 in real estate property taxes.
If your home has gained greater value over the last year, it could face capital gains taxes. Essentially, you could end up paying taxes on any of the profit you make from selling your home.
To be exempt from capital gains taxes, you’d have had to live in that residence for two of the last five years. If it’s only been one year, you’ll likely face a capital gains tax.
Capital Gains Tax
The capital gains tax rates are likely to be anywhere from one0 percent to 20 percent. It can even go as high as 37 percent. To calculate how much of your money will face a capital gains tax, find the original amount you paid for your house and subtract it from the new home purchase price.
If you don’t want to end up paying capital gains tax, you may want to wait to sell your home after two years. At this point, legislation prevents the government or IRS from instituting a capital gains tax on a real estate profit below $250,000 after two years of owning a home.
The Breakeven Target
Breakeven pricing is the point when a property (or any product) you sell will gain zero profit. The home sale price will be equal to the same amount you purchased the property one year ago.
However, it is much more likely to break even on the purchase of your home if you have owned it for about five to seven years. You will need to calculate the purchase price, the ownership cost, and the selling costs to determine the amount you need to sell your property to break even. There are creative ways to sell a house that may help you break even.
Closing Costs When Selling a House
Often, closing costs come at the end of selling your house and tend to blind-side sellers. It’s important to understand that closing costs entail the transfer of money and documents to transfer ownership to the new home buyer(s).
A third party known as an escrow company is responsible for completing the closing. The escrow company will complete the appropriate transfer of all money, paperwork, and other factors between the buyer and seller to complete the home sale.
Homeowners or sellers tend to pay anywhere from one percent to 3 percent of the property purchase price. However, this rate can go up to 7 percent.
Is It Worthwhile to Sell a House After One Year in the First Place?
There are definite downsides to selling a house after only one year of residence. First, you’ll need to pay to move once again. Depending on your local area, it can cost anywhere from $200-300 to as much as $2,000 to move.
You will much more likely pay more toward interest rates in the first year of owning a home than payment toward the principal balance of your loan.
Lenders set up a loan in a way where you’re likely to pay more toward the interest in the first few years of owning a home instead of the principal balance.
Essentially, it is not the best idea to sell your home after only one year of residing in that property. The main reason is that you are generally more likely to lose money in the home sale. Most homeowners usually wait one to three years on average before selling their property.
Reasons Why You Might Sell a House After One Year
Despite the financial implications associated with selling a house after one year, there are significant reasons why it might be your best option. Your career or job may have changed, and you need to relocate because your work site was closed.
Your family situation may have changed, or you may have a new child who needs an additional bedroom. Perhaps an older relative who needs to move in with you. It’s also possible you need to move closer to ailing family members. Furthermore, you may want to complete some renovations and flip a house to make a nice profit.
Market appreciation or the loss of income may also lead you to sell your home after only one year of owning it. We discuss these factors in more detail below.
Usually, market appreciation after one year would be lower than after five or more years. However, sometimes the value of your home can grow significantly, and you might find yourself amid a strong seller’s market.
If your home’s equity grows very fast, it might be the right time to sell and make a good profit. There may be new real estate developments and improvements in your neighborhood, causing the home values in your area to skyrocket. Even if you didn’t think of selling your home so quickly, it might be the best time to put your house on the market due to high market appreciation.
You Can’t Afford to Keep Your Home
A financial emergency could take place. You could lose some form of income, such as through business losses, and generally, be unable to afford your mortgage.
Suppose you and your spouse had two jobs and two forms of income. If the larger income disappears due to being laid off, you might be in trouble. Medical emergencies may also take place, and you’re left to pay off large payments associated with surgery, heart disease, or cancer treatments. In these cases, people cannot pay off a large mortgage loan.
There are multiple instances when you might be unable to afford your home in Texas and may need to sell it after only one year of residing in this house.
House Flipping Has Forced Appreciation
Whether you are a house flipper or house flipping in your region has led to forced market appreciation, you might see property prices in your area have blossomed significantly. It could even be a massive jump in home prices if renovations and house flipping have become a mainstay in your neighborhood.
If there’s a real estate bubble in your area with skyrocketing home prices due to renovations, it might be time to sell your home. You could make a significant profit. You might want to take advantage of this before property prices decline again.
If you do find yourself in a situation where you need to sell your house within a year after purchase, there are essential costs you’ll need to be aware of. These rates include capital gains taxes, moving costs, and closing costs.
If you’re lucky, you might experience market appreciation or forced appreciation due to house flipping, which will give you a profit after selling your Texas home. Now that you’ve read through this guide, you should be prepared to sell your property successfully.