Legend asked:
I purchased a house for $100,000. I decide to sell it tomorrow because this time it increased in value to $110,000 overnight. No pre-payment penalties. I walk away with $10,000. What other costs can you foresee?
Other than realtor’s fees and closing costs.
Melanie
I purchased a house for $100,000. I decide to sell it tomorrow because this time it increased in value to $110,000 overnight. No pre-payment penalties. I walk away with $10,000. What other costs can you foresee?
Other than realtor’s fees and closing costs.
Melanie
Reginald
Capital gains tax. It wouldn’t make much sense to sell with only 10k equity. Between like you said Realtor fees, and closing costs you would maybe have 2k left. After taxes you may get to keep $1300 or so. It would be a lot of aggravation for very little money.
Brian
After closing costs and realtors fees there won’t be anything left – you may owe.
Chris
you will be liable for short term capital gains taxes. i would suggest speaking with an accountant or tax attorney for advice on how to handle this situation. With only 10K in equity, after paying realtor fees (6%), buyers closing costs, and short term capital gains taxes, you will most likely end up with a whole lot of nothing in return for a lot of aggrevation in moving out. I would definitelty recommend holding onto the property for a while.
Constance
That’s a whole lot of hassle for such a little money. $6600 commission, $1300 closing fees. Still think it’s worth it? Plus, keep in mind that even in the hottest markets, homes are sitting around for 6 months or more- unsold.
Albert
If it made that over night then I would at least hang on to it to see how much more you can make. How do you know it increase that much over night. Did you have an appraisal done on this property?
Harold
You aren’t going to walk away with much after Realtor’s fees and closing costs.
There are no consequences except whatever you may owe the IRS on capital gains for the year (ask your tax accountant) and all the time you are investing.
Alice
As mentioned, you won’t make $10,000. With a 6% listing from a REALTOR, you would be looking at $6,600 in comissions, deed prep, revenue stamps (if your state charges them) plus, on a home in that price range, your prospective buyers are generally first time buyers who will almost assuredly ask you to pay their closing costs which would be in the $3,000 range. So very quickly, you are over $10,000 in fees and costs.
The key question is how do you know it increased to $110,000 in value? The market value of a home is what a buyer is willing to pay, not the appraised amount. There may also be a minimum timeframe in your state as to how long you must hold the property before you sell it. This is to protect the lenders as they made the original loan with the intent to make money. A quick resale harms them.