Can I sell my house after owning it for just 2 years?
Key takeaways
- It is possible to sell a house after owning it for just two years, but it's generally not wise financially.
- Selling a house comes with significant closing costs, as well as real estate commissions and moving expenses.
- Owning and living in a home for at least two years can qualify you for tax exemptions on capital gains.
How soon after buying a house can you turn around and sell it? Technically, you can put it back on the market the same day you get the keys — but just because you can doesn’t mean you should.
Typically, the longer you hang on to a home, the better. You’ll earn more equity and it will have time to appreciate in value. But life can be unpredictable, and sometimes you just need to sell and move on. Selling your house after owning it less than a year is generally not a great idea financially. Does waiting at least two years make more financial sense? Let’s find out.
Can I sell my house after 2 years?
Of course you can. But, in an ideal world, you’d want to stay in your home long enough not to lose money on the transaction.
In the seller’s market we’ve seen recently, high home appreciation rates have made it fairly easy to turn a profit in two years of homeownership in many parts of the country. But with interest rates still high and prices near record levels, that may not be the case for much longer: If you’ll need to buy a new home after you sell, the current market could mean buying at a higher rate than you currently have, and at a price that eats up the profits on your sale.
Keep in mind that selling a house isn’t free — it comes with significant closing costs. According to data from ClosingCorp, for a single-family home in the U.S. in 2021, closing costs averaged nearly $7,000. While that full amount would not be shouldered by the seller alone, it still takes a big bite out of your profits.
You’ll need to factor in real estate commissions (typically 2.5 to 3 percent of the sale price to your real estate agent, and potentially to your buyer’s agent as well) and moving costs too. And if your home’s value has stagnated — or worse, dropped — since you bought it, you could potentially find yourself underwater on your mortgage.
All of which is to say, it’s best to stay put in your home for long enough to recoup these costs. If that happens in two years, great! If not, it may be more prudent to hold off on selling until the math adds up.
Tax implications of selling a house after 2 years
When deciding whether to sell, you’ll want to consider the potential tax implications as well. Selling before the two-year mark can be costly.
“Staying long enough to hit 24 months can save you a significant amount of money on taxes,” says Jeremy Babener, a tax attorney and founder of Structured Consulting in Portland, Oregon.
It’s all about capital gains taxes. Owning and living in a home for two full years can qualify you for the IRS’s Principal Residence Exclusion. This allows you to deduct up to $250,000 in sale proceeds if you’re a single filer, and up to $500,000 if you are married and filing jointly.
“If you can’t make it to 24 months, try to stay at least 12,” says Babener. “Short-term capital gains taxes would apply if you sell your home and make a profit less than a year after buying it.”
How long should I ideally wait?
To avoid losing money, it’s best not to sell your home until you can make back enough to cover your closing and transaction costs. The waiting time required for that can vary depending on a lot of factors — the price you paid, your closing costs, the rate of appreciation, the prevailing market conditions — but it’s typically about five years. If you can’t wait five years, try to make it to at least two to avoid long-term capital gains taxes.
Depending on your situation, you may have options to help you stay in your home long enough to hit that two-year mark. If you’re selling because of a job offer in another city, for example, you could try to negotiate a temporary remote-work situation. And if you’re selling because the mortgage payments are too much of a burden, there are also options available to help you get caught up. Look into forbearance, loan modification and national or local assistance funds that might help you get back on track with payments and stay in your home, at least for long enough to sell it more safely.
Bottom line
Your home is more than just the roof over your head. It’s an investment, and you want to get the largest return on that investment that you can. Selling a house after just two years can cost you money, rather than making you money — be aware of your home’s appreciation in relation to how much you paid for it, and how much you owe on the mortgage. And when you do decide to sell, work with an experienced local real estate agent to make sure you’re maximizing your profit potential.
