According to the National Association of Realtors, the average a homeowner lives in their home is for 10 years. However, this poses the issue of how long you should stay in one area before moving on. How long should you keep your house before selling it?
The answer will be determined by a number of things. A new career opportunity, expanding family circumstances, an unexpected divorce, or another big life event might all be compelling reasons to sell your house and relocate. However, selling too soon after purchasing might be pricey. If you do not time it well, you may end up losing money altogether.
This article will help you learn more about selling your house after two years in Memphis and know the closing costs when selling a house.
How to Sell Your House After 2 Years in Memphis
If you’ve been thinking about placing your property up for sale, keep reading to discover how to sell a house fast and prevent any problems that might hold down the process.
1. Determine your selling strategy
First and foremost, you must decide how you intend to put your home on sale. There are several approaches you may use when home selling. You can make use of a real estate agent, use an ibuyer, or sell it yourself.
2. Consider staging
Staging a property will give the space a facelift by rearranging furniture, adding décor where appropriate, and improving the lighting.
3. Give it a thorough cleaning
Nobody wants to go into a filthy house, especially the one they want to buy. This may seem apparent to people seeking ways to sell a property fast, but it may be tough to do when you are short on time.
4. Adjust the price
Another important element to consider when advertising your house is the price. You should look at what comparable properties are selling for and what the common consensus is in the Memphis region.
Costs of Selling Your House After 2 Years in Memphis
Selling your home may be costly. There are other expenses to consider both before and after the transaction. If these fees are large, a direct sale is a considerably better option.
1. Costs of Listing
- Costs of marketing
Whether your realtor includes marketing services in their fee or not, there are a few marketing charges to consider. For example, many sellers would engage a professional photographer or videographers to shoot their houses.
- Costs of repair
Most residences will need at least a few repairs before they can be listed on the MLS. Once a home buyer is found for a new home, it is likely that there will be talks about who will perform the repairs discovered during the inspection. You can either agree to perform some of these repairs or negotiate a reduction in the home’s sale price.
- Cost of staging and cleaning
Before placing their properties up for sale, most sellers will have them professionally cleaned. Many people may clear out their own stuff and clutter, storing any unwanted items elsewhere.
- In a normal house transaction, the seller must pay around 2% of the total sale price in closing expenses. This can be discussed between the buyer and seller, but 2% is usually what you can anticipate paying.
2. FSBO (For Sale By Owner) Listing Fees
While selling your property on your own, It can save you money on agent commissions and there are additional expenditures to consider. In addition to many of the charges mentioned above, here are some more expenses to anticipate when selling your home in the Memphis area.
- Costs of house preparation
Preparing a property for sale may be time-consuming and labor-intensive. Before the house is marketed for sale, there are a few things that must be completed, just as with a listing. You will need to clean the entire house from top to bottom. Make any necessary repairs, and be prepared to make more following the inspection.
- The cost of your time
You will spend an enormous amount of time dealing with the transaction if you opt to sell the home on your own through an FSBO listing. You’ll need to be present for showings, generate listings and promotional materials, answer queries, manage paperwork, negotiate, and more.
3. Direct Selling Expenses
When you choose to sell your Memphis home to a buyer like Fair Cash Deal, then you will be in a position to evade all of the above-mentioned selling charges. There are no hidden fees, repairs, or closing charges. We buy directly and as-is, potentially saving you money.
Property Selling Taxes
This is dependent on your tax filing status and the sale price of your property, but you may be qualified for an exemption. If you’re single, the IRS normally permits you to exclude up to $250,000 in capital gains on real estate. Capital gains on real estate of up to $500,000 for married couples filing jointly.
If you meet any of the following circumstances, you should pay tax on the whole gain on the sale of your home:
- You did not make the house your primary residence
- You had the house for fewer than two years out of the five years you had it before selling
- In the five-year period before the sale, you didn’t even live in the residence for at least two years before selling it. Those who are disabled, Foreign Service, as well as those in the military, or the intelligence community, are eligible for a reduction on this component; for additional details, see IRS Publication 523
- You utilized the exclusion of $250,000 or $500,000 on another residence in the two years preceding the sale of this one
- You bought the house within the previous five years through a like-kind exchange (essentially trading one specific investment property with another, also known as a 1031 exchange)
- If it is determined that all or a portion of the earnings from the sale of your house are taxable, you must establish the applicable capital gains tax rate.
Capital Gains Tax
A capital gains tax refers to a levy imposed on earnings gained from the sale of an asset.
Capital gains taxes can be applied to both securities (such as bonds and stocks) and physical assets (such as real estate, boats, and vehicles).
The difference between what you paid for an asset (your cost basis) and what you sell it for is taxed by the IRS and several states (your sale price).
If you owned the asset for under a year, you would be subject to short-term capital gains tax rates. This rate is much like your conventional income tax rate, which is commonly referred to as your tax bracket.
Long-term capital gains tax rates would apply if you held the asset for longer than a year. The rates are substantially lower; many persons qualify for a 0% tax rate. Everyone else pays either 15% or 20% of the total. It is determined by your filing status and income.
The Break-Even Target
A break-even target is a change in value or amount of money, required to sell an asset in order to offset the transaction expenses of acquiring and owning it.
Just about any transaction may benefit from break-even pricing. For example, a house’s break-even point would have been the sale price at which the owner could pay the real estate commissions, upgrades, upkeep, property taxes, hazard insurance, mortgage interest, home purchase price, and closing fees. At this price, the homeowner would not make a profit without losing money.
Closing Costs When Selling a House
Closing expenses are a collection of fees paid by both sellers and buyers at the closing of a real estate transaction that is separate from broker compensation. According to Realtor.com, the expenses range from roughly 1% to 7% of the transaction home price in total, while sellers often pay anywhere from 1% to 3%.
1. Title insurance: The buyer and the lender often purchase their own title insurance policies, which protect them in the event of a title problem after closing.
- According to Realtor.com, the average price is $1,000.
2. Title search: This ensures that you are the legitimate owner of the property and that there are no ongoing lawsuits or judgments against it.
- According to Realtor.com, the typical cost is $300 to $600.
3. Appraisal: This analysis determines if the property is worth the amount borrowed from the lender by the seller.
- According to Realtor.com, the price ranges from $450 to $650.
4. Home inspection: Ensures that there are no severe flaws with the construction or systems of the home.
- According to Nerdwallet, the price ranges between $300 and $500.
5. Survey: Many states demand a survey to show the legal boundaries of the property when applying for a loan.
- According to Realtor.com, the price ranges from $350 and $500.
6. Credit report: The lender will request a credit report from one or more of the three main credit reporting bureaus on the buyer.
- According to Realtor.com, the fee ranges from $20 to $50 for each report.
7. Loan payoff costs: Fees for application and assumption, loan origination, and prepaid interest rates, are all included.
- According to Money Crashers, it is between 0.5% and 1.5% of the sale price.
8. Outstanding amounts owed on the property: Property taxes, homeownership insurance, utility costs, and HOA dues are all included (if applicable). These sums will be prorated based on the closing date.
- Cost: Variable
Is It Worthwhile to Sell a House After 2 Years in the First Place?
This question has no conclusive explanation. You should think about how much time you’ve spent in the house, how much money you’ve put into it, and how well the housing market is doing at the time of sale.
If you have only lived in a home for a short time, it is typically advisable to wait until you have owned it for a longer amount of time before selling. In a hot seller’s market, you may have swiftly built up enough equity and want to take advantage of the opportunity to sell your house soon, to profit while you still can.
Reasons Why You Might Sell a House After 2 Years
The majority of people don’t buy a house with the intention of simply living in it for a year or two, yet it happens more frequently than you may imagine. Families grow, financial conditions change, job relocation needs arise, and occasionally you simply receive an offer you can’t refuse. Packing and relocating again in a short period of time is a major hassle, but the true anguish comes when you encounter some unforeseen charges.
This refers to the increase in the market value of a residence over time. A higher home value might result in a profit for the owner when it is sold, giving it an excellent incentive to sell a property after two years.
You Can’t Afford to Keep Your Home
Your mortgage payments may be too high, or your property taxes may have risen significantly. You may also need to free up equity in order to pay medical costs or living expenses in the event of a health emergency.
House Flipping Has Forced Appreciation
Essentially, forced appreciation refers to the act of acquiring a property that is not a good investment and changing it into one. Armchair investors aren’t bidding or looking for these homes, which increases profitability and reduces competition.
Historically, it has been assumed that you must wait five years or more to recover your buying and selling expenditures.
The market has been extremely different in the last two years compared to the historical norm. Depending on your location, you may have experienced a 25% or more increase in the last three years. This might result in a significant profit for you.
If this was your principal dwelling, you might possibly keep the earnings without having to pay capital gains tax. You should see a tax professional to check this depending on your specific situation.
If you are undecided about who pays the closing costs and all of these costs seem excessive, and you need to sell your property soon, contact Fair Cash Deal, since we buy homes in Tennessee. We are one of the most reputable companies that buy houses in Memphis. We are seasoned real estate agents that can assist you in determining the value of your home and advising you on the best time to sell a house.