What if I’m unable to sell my home after less than a year? Selling on the open market isn’t the only option when you need to move quickly. You may find other alternatives that are a better fit for your situation, such as: Rent out your home: You might need to sell but don’t have enough equity or money to pay the seller’s fees in order to complete the transaction. If you live in a strong rental market, it may work out better to rent out your house until your home appreciates more. However, Wiggs recommends checking with your bank to see if you’re able to rent out your property, as they usually base your loan on being owner-occupied. Hold onto the property a little longer: Perhaps you’re in a position where you don’t financially need to sell your home and decide to keep it as an investment or a second home. Vacation rental: Depending on where your home is located, renting your home as a vacation rental may be a way to delay needing to sell it immediately. Request a cash offer: You can skip repairs and preparations and request an all-cash offer from a home-buying service such as HomeLight’s Simple Sale platform. Tell us a few details about your home, and in as few as 48 hours, we’ll provide a no-obligation all-cash offer. Simple Sale sellers have the ability to close in as little as 10 days. The Simple Sale platform will also show you what you might get for your home selling with a top agent instead. Partner with a top agent who can get you top dollar: Finding the right real estate agent who knows how to set an effective pricing strategy to help get optimal results can make the selling process easier. HomeLight’s free Agent Match platform can connect you with a top-performing agent in your market. Ultimately, you need to determine your estimated net proceeds and weigh them against the cost of selling your home. If it doesn’t balance in your favor, you must decide if you’re willing to take a loss, or if you can wait to sell your home. How much does it cost to sell my home? Selling a home in less than a year can be expensive because you are essentially repeating the process when you originally bought the home, but possibly without much appreciation in value. This includes paying all the fees associated with commissions, closing, and related transaction costs. This is why time is usually needed to help balance out these expenses. The typical costs for selling a median price home in the U.S can add up quickly and include: Staging and house prep fees (varies) Realtor commissionsfor the sale (3%-5.8%) Inspection and repair fees (varies) Closing fees to sell, including title, recording, and escrow fees, transfer taxes, and prorated property taxes (1% to 3% of the sale price) Second set of closing costs (if you’re buying a new home) Seller concessions (2% to 6% to financially help the buyer) Overlap costs (1% to 2% to pay for two houses at the same time) Moving and relocation costs (varies and usually based on distance) Mortgage payoff (varies) Closing costs vary, depending on both the regulations of your state and your particular financial situation. The average closing costs required to buy a home in the U.S. in 2024 were $6,905 including transfer taxes, and around $3,860 excluding transfer taxes. Some locations have much higher closing costs, such as Delaware, New York, and the District of Columbia. Remember to factor in capital gains taxes A home is typically considered a capital asset by the IRS, and can be subject to taxes when you own it for a short period of time and it appreciates. Determining the taxes you owe can be complex and it’s often recommended to seek out the advice of a seasoned tax professional. However, for the most part, it usually depends on the exact amount of time you own the property, such as in the following scenarios: When you own your home for less than one year If you are selling your home after owning it for less than a year, you’ll likely have to pay a short-term capital gains tax on the amount you gain in profit from the proceeds. This tax is assessed on assets held for a year or less and taxed as ordinary income based on your tax bracket. For example, in 2022, there are currently seven federal income tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%. If your household falls into the 24% tax bracket, and you make $50,000 on the sale of your home, you could be required to pay a short-term capital gains tax of $12,000. 2024 federal income tax brackets (short-term capital gains) For the 2024 tax year, the IRS applied inflation adjustments to all income limits and all tax brackets. The first table below shows the 2024 federal income tax brackets and rates for ordinary income, considered short-term capital gains. Tax rate Single filers Married filing jointly Head of household 37% $609,351 or more $731,201 or more $609,351 or more 35% $243,726 to $609,350 $487,451 to $731,200 $243,701 to $609,350 32% $191,951 to $243,725 $383,901 to $487,450 $191,951 to $243,700 24% $100,526 to $191,950 $201,051 to $383,900 $100,501 to $191,950 22% $47,151 to $100,525 $94,301 to $201,050 $63,101 to $100,500 12% $11,601 to $47,150 $23,201 to $94,300 $16,551 to $63,100 10% $0 to $11,600 $0 to $23,200 0$ to $16,550 Source: IRS.gov (Tax inflation adjustments) When you own your home for more than a year, but less than two years Any profits from the sale of your home in this situation will typically be taxed at the lower long-term rate — either 0%, 15%, or 20%, based on your capital gains tax bracket. 2024 capital gains tax brackets (long-term capital gains) This second table shows the long-term capital gains rates for tax year 2024. Single filers can qualify for the 0% long-term capital gains rate with a taxable income of $47,025 or less. Married couples filing jointly can qualify with an income of $94,050 or less. Tax rate Single filers Married filing jointly Head of household 20% $518,901 or more $583,751 or more $551,351 or more 15% $47,026 to $518,900 $94,051 to $583,750 $63,001 to $551,350 0% $0 to $47,025 $0 to $94,050 $0 to $63,000 Source: IRS.gov (Capital gains table) The IRS does offer various capital gains tax exemptions; however, the exclusions typically don’t apply when you sell your home after owning it less than two years. When you own your home for more than two years If you have owned the home for more than two years, in the majority of cases, the IRS offers an exclusion if you meet the following criteria: Length of time: Typically, you need to have lived in the home you are selling for a minimum of two years out of the five years prior to the sale. This two-year time frame doesn’t have to be continuous or be the last two years immediately preceding the sale. Amount of the gain: If you owned and lived in the home for two of the past five years before the sale and are a single individual, then $250,000 of profit is typically considered tax-free. Any profit exceeding this amount is generally reported as a capital gain and taxes would be charged accordingly. Tax Filing status: If you are married and filing a joint tax return then the amount exempted increases to $500,000 and is usually considered to be tax-free. Primary residence requirement: The law lets you exclude the profit from your taxable income as long as the home was your primary residence (you lived in it for two of the five years leading up to the sale, and you did not already claim an exclusion on another home in the last two years). Please note: If you don’t meet all of these requirements for the exemptions listed above, the IRS has special rules that may allow you to claim a full or partial exclusion. Consult with a tax professional when selling your home, especially if you have owned your property for less than one year, to determine if other exclusions apply to your specific situation. I would tell sellers when we’re selling in a short period of time, if there’s anything you can do, you should do it because you’re going to want to show why it’s worth more. Sherry Wiggs Real Estate Agent Close Sherry Wiggs Real Estate Agent at Houlihan Lawrence Years of Experience 20 Transactions 667 Average Price Point $563k Single Family Homes 380
