Selling a House Within a Year of Purchase: What You Need to Know

Selling a House Within a Year of Purchase

Selling a home shortly after buying it is a bold move that can pay off or lead to financial losses. This guide examines the implications of selling within 12 months, from tax penalties and extra fees to overcoming buyer wariness.

Key Takeaways

  • Expect to pay mortgage prepayment penalties and potentially capital gains taxes.
  • Double closing costs like commissions and land transfer taxes eat into profits.
  • Buyers may suspect issues with quick resales, so price competitively.
  • Consider alternatives like renting out the property to recoup costs.
  • Work with an experienced real estate agent to maximize sale price.

Selling so soon after purchase is rare, but sometimes life circumstances necessitate it. Here’s what to expect if you’re considering a quick resale in Canada.

Mortgage Prepayment Penalties Are Almost Guaranteed

Most mortgages have restrictions on prepaying or breaking your term early. Expect to pay stiff penalties if selling before the maturity date.

In BC, penalties can range from 3 months’ interest to the full interest rate differential (IRD). The IRD ensures the lender recoups interest they would’ve earned at your contracted rate for the remainder of the term.

On a $500,000 mortgage, you may face over $15,000 in prepayment charges. Ouch! Read mortgage terms closely and shop around for lower penalty options.

Capital Gains Taxes Apply on Investment Properties

While principal residences avoid capital gains in Canada, investment properties do not.

If selling an investment or secondary home within a year, you’ll owe capital gains tax on 50% of your profits . At a 50% inclusion rate in Ontario, a $100,000 gain equals $25,000 in capital gains tax .

Even if you sell at a loss, you must report capital losses on your tax return to reduce tax liability . Consult an accountant to maximize tax savings.

Buyers Beware of Potential Issues

Buyers will dig into the sale history and grow wary of quick flips. They’ll suspect:

  • Structural or mechanical issues 
  • Shoddy renovations or unauthorized changes 
  • Neighborhood changes or construction noise 
  • Financial struggles forcing a quick sale 

Provide a reasonable explanation for selling. Use an inspection report to assuage concerns over the home’s condition. Price competitively and prepare for closer scrutiny.

Double Closing Costs Eat Into Profits

Selling too soon after buying means paying closing costs twice :

  • Realtor commissions (up to 6% of sale price) 
  • Legal fees ($1000+)
  • Land transfer taxes (up to 5% of value) 
  • Moving costs, prep, and staging

On a $700,000 home, you may pay up to $49,000 in total closing costs. Not great for profits!

Consider Renting Out the Property

If selling at a loss, renting out the home can generate income while waiting for values to rise .

Aim to charge enough in rent to cover the mortgage, taxes, and maintenance. Screen tenants thoroughly – problem renters can sink your plan!

With Toronto rents up 26% in 2022, renting is worth considering . Take advantage of low vacancy rates.

Work Closely With an Experienced Real Estate Agent

Selling a newly purchased home takes expertise. I advise clients to work with a realtor who specializes in quick resales .

Look for an agent with experience in:

  • Accurately pricing fast-sale homes
  • Developing marketing to overcome buyer doubts 
  • Advising on disclosures and paperwork 
  • Negotiating strategically to maximize sale proceeds 

Vet agent experience – 10-20 similar deals is ideal. This is not the time for rookies!

The Bottom Line

Selling a home under a year of purchase is risky but can pay off. Understand the costs and taxes involved. Price competitively and hire an expert agent to maximize your net proceeds and overcome buyer hesitations.

Have you sold a home quickly after buying? Share your experiences and advice below!

FAQs:

Q: What do I need to know if I’m selling a house within a year of purchase?

A: If you’re selling a house within one year of purchase, you could be subject to capital gains taxes. Homeowners who sell their house after owning it for 1 year or less may be liable for short-term capital gains taxes on the profits earned from selling the home. It is important to understand that when buying and selling a house within a year or less, you may have to pay tax on the sale.

Q: What should I do if I want to avoid capital gains when selling my house after 1 year or less?

A: If you are looking to avoid paying capital gains when selling your house after 1 year or less, you might want to consider consulting with an advisor and seeing if there are exemptions available that would allow you to be exempt from capital gains. Additionally, it’s important to determine the current market value of your home so that if applicable, you can accurately calculate any taxable capital gains.

Q: How do I determine the market value of my home before I sell it after one year or less?

A: The best way to determine your home’s market value is by hiring a real estate broker or agent who will conduct a comparative market analysis (CMA). This will help provide an accurate assessment of how much your property is worth in today’s real estate market.

Q: Can I still sell my house after just one year without being subject to capital gains?

A: Yes, as long as you’ve lived in the home for at least two out of five years prior to sale. Generally speaking, homeowners can sell their house without being subject to capital gains as long as they have owned and lived in the home for at least two out of five years prior to sale. However, this only applies if they meet certain criteria.

Q: What costs should I expect when selling a house after one year?

A: When it comes time for selling a house after one year, homeowners should expect various costs associated with buying and/or selling property such as closing costs, fees related to listing and advertising the property, legal fees or title insurance premiums. Additionally, homeowners should also account for any property taxes that may be due upon completion of the sale.

Q: Are there special considerations if I am an investor buying and then quickly reselling a property?

A: Yes. Real estate investors who buy and then quickly resell properties within one year are often considered “traders” by tax authorities and may be subject to different rules regarding taxation of any profits made from these types of transactions.

Q: Is there anything else I need to think about before deciding whether or not to sell my home after owning it for just one year?

A: Yes – potential buyers may be hesitant about buying a home which has been owned by its previous owner for only 1 year or less. Therefore, homeowners looking at potentially selling their home after owning it for just one year might want consider talking with their realtor about strategies which might make potential buyers more comfortable with making an offer on their property.

Q: Can I sell my home within a year or less without having any tax implications?

A: Generally speaking no – unless certain criteria are met (such as living in the home for two out of five years prior) homeowners who own their homes for 1 year or less will likely have some sort of tax implications associated with them when they decide to sell. It’s important that you consult with an advisor before making decisions regarding taxation related matters.

Conclusion:

Selling a house within a year of purchase can be a stressful and financially challenging decision. When you sell your home after less than a year, it is rare to make a profit. In fact, you may even lose money or break even, as there are several costs associated with selling a property. One of the biggest drawbacks of selling a house after less than a year is the need to pay capital gains tax.

If you sell your primary residence within a year of buying it, you may be required to pay this tax, which could significantly reduce any potential profit you may have made. Additionally, real estate commissions can also eat into the final sale price, lowering the amount of money you can make on the sale.

There are alternatives to selling your home if you find yourself needing to move or relocate within a year of buying a house

Renting out your property, for example, can provide some additional income while allowing the value of your home to potentially increase over time. However, it is important to consider the costs associated with being a landlord, such as maintenance and mortgage payments, before making this decision.

If selling your home is still the best option for you, it is crucial to be aware of the potential consequences. For instance, buyers will know that you have only owned the home for a short period of time, which may make them more cautious and skeptical about the property. 

They might wonder if something is wrong with the property or if you are trying to sell it for a higher price due to unforeseen issues.
Furthermore, when you sell a property within a short time frame, any gain you make on the sale must be reported to CRA.

The profit you make, if any, may be subject to capital gains tax, further reducing your overall earnings. It is important to consult with a tax professional or mortgage broker to understand the financial implications of selling your home after less than a year.

Ultimately, selling a house within a year of purchase can be a complex decision. While it may be necessitated by the need to relocate or other life circumstances, it is crucial to consider the costs associated with the selling process and potential setbacks that may arise. Assessing alternatives to selling, such as renting out the property, can also be a viable option to consider before making a final decision. 


Ready to turn your real estate dreams into reality? Contact Richard Morrison, Vancouver’s top realtor with 20+ years of experience. As a Medallion Club member and RE/MAX Hall of Fame award winning agent, he’s the expert you need on your side. Whether buying, selling, or investing, Richard’s personalized approach and deep market insights ensure a successful transaction. Reach out to Richard today at (778) 900-2235 and make your real estate journey seamless and rewarding.

Lets Have a Smart Conversation.

Let's Chat! Looking for a REALTOR© who can exceed your expectations? Look no further than Richard Morrison! His mission is to serve without limit & provide solutions that cater to your core needs.
* 20+ Years of Experience
* Medallion Member
* RE/MAX Hall of Fame

Your Privacy is important to us. View our Privacy & Data Collection Policy.

Latest Vancouver Listings

Active
$1,799,900
113 539 W 28TH AVE, Vancouver Apartment for sale, MLS® R2894978

Beds: 3Baths: 2Built in 20251077 sqft

4 mins ago

Beds: 3Baths: 2Built in 20251077 sqft

Soto on W28th is a rare collection of 3 and 4 bedroom garden bungalows,...

$1,799,900

MLS®: R2894978 Rennie & Associates Rea...

4 mins ago

Active
$1,738,000
745 SKEENA ST, Vancouver Real Estate for sale, MLS® R2894887

Beds: 2Bath: 1Built in 19301775 sqft

10 mins ago

Beds: 2Bath: 1Built in 19301775 sqft

Charming opportunity awaits on this 33 x 122 flat lot adjacent to Adanac...

$1,738,000

MLS®: R2894887 Macdonald Realty

10 mins ago

Active
$898,000
308 3188 RIVERWALK AVE, Vancouver Apartments for sale, MLS® R2894945

Beds: 2Baths: 2Built in 2021912 sqft

43 mins ago

Beds: 2Baths: 2Built in 2021912 sqft

$898,000

MLS®: R2894945 YVR International Realty

43 mins ago

Active
$1,190,000
2201 867 HAMILTON STREET BC, Vancouver, R2894943

Beds: 2Baths: 2Built in 19941244 sqft

43 mins ago

Beds: 2Baths: 2Built in 19941244 sqft

$1,190,000

MLS®: R2894943 YVR International Realty

43 mins ago

Active
$778,900
1704 1009 HARWOOD STREET BC, Vancouver, R2894939

Bed: 1Bath: 1Built in 2014582 sqft

44 mins ago

Bed: 1Bath: 1Built in 2014582 sqft

Location! Location ! Location! Welcome to MODERN developed by AMACON in...

$778,900

MLS®: R2894939 RE/MAX Crest Realty

44 mins ago

Active
$658,800
1103 1238 SEYMOUR ST, Vancouver Condos for sale, MLS® R2894921

Bed: 1Bath: 1Built in 1996626 sqft

1 hour ago

Bed: 1Bath: 1Built in 1996626 sqft

Welcome to The Space building! This 2-level one bedroom LOFT features a 16...

$658,800

MLS®: R2894921 eXp Realty

1 hour ago

Active
$988,000
322 2083 W 33RD AVE, Vancouver Apartment for sale, MLS® R2894914

Beds: 2Baths: 2Built in 2003800 sqft

1 hour ago

Beds: 2Baths: 2Built in 2003800 sqft

Welcome to DEVONSHIRE HOUSE by POLYGON. Nestled in Quilchena Park...

$988,000

MLS®: R2894914 RE/MAX City Realty

1 hour ago

Active
$1,335,900
232 602 2ND ST, North Vancouver Real Estate for sale, MLS® R2894907

Beds: 2Baths: 3Built in 20261069 sqft

1 hour ago

Beds: 2Baths: 3Built in 20261069 sqft

Morrison Walk We invite you to Walk This Way ... From sleek architectural...

$1,335,900

MLS®: R2894907 Macdonald Realty

1 hour ago

Active
$2,699,000
233 W 15TH AVE, Vancouver Houses for sale, MLS® R2894888

Beds: 3Baths: 3Built in 20241609 sqft

2 hours ago

Beds: 3Baths: 3Built in 20241609 sqft

This development will certainly set a new standard for quality &...

$2,699,000

MLS®: R2894888 Stilhavn Real Estate Servic...

2 hours ago

Active
$869,000
1306 1111 RICHARDS STREET BC, Vancouver, R2894881

Bed: 1Bath: 1Built in 2021606 sqft

2 hours ago

Bed: 1Bath: 1Built in 2021606 sqft

Welcome to 8X ON THE PARK in Yaletown. This stunning one-bedroom plus den...

$869,000

MLS®: R2894881 Panda Luxury Homes

2 hours ago

Active
$1,399,000
3006 1283 HOWE STREET BC, Vancouver, R2894879

Beds: 2Baths: 2Built in 2019833 sqft

2 hours ago

Beds: 2Baths: 2Built in 2019833 sqft

Indulge in the epitome of luxury living of Tate at Howe St, Vancouver....

$1,399,000

MLS®: R2894879 Panda Luxury Homes

2 hours ago

Active
$1,088,000
879 OLD LILLOOET ROAD BC, North Vancouver, R2894877

Beds: 3Baths: 3Built in 20161871 sqft

2 hours ago

Beds: 3Baths: 3Built in 20161871 sqft

LYNNMOUR VILLAGE Well maintained owner occupied 5 bedroom 3bath home in...

$1,088,000

MLS®: R2894877 Multiple Realty Ltd.

2 hours ago

Active
$2,250,000
2615 SKILIFT PL, West Vancouver Real Estate for sale, MLS® R2894866

Beds: 3Baths: 2Built in 19582498 sqft

3 hours ago

Beds: 3Baths: 2Built in 19582498 sqft

This 2 level home has nice water views which could be improved greatly...

$2,250,000

MLS®: R2894866 Royal LePage Sussex

3 hours ago

Active
$565,000
1505 1082 SEYMOUR ST, Vancouver Apartments for sale, MLS® R2894858

Bed: 1Bath: 1Built in 2006513 sqft

12 hours ago

Bed: 1Bath: 1Built in 2006513 sqft

Discover urban living at its finest in this stylish junior one-bedroom...

$565,000

MLS®: R2894858 Oakwyn Realty Downtown Ltd.

12 hours ago

Active
$5,980,000
6850 BEECHWOOD STREET BC, Vancouver, R2894832

Beds: 6Baths: 5Built in 19915157 sqft

13 hours ago

Beds: 6Baths: 5Built in 19915157 sqft

Gorgeous Customized home on beautiful BEECHWOOD STREET! Surrounded with...

$5,980,000

MLS®: R2894832 eXp Realty

13 hours ago

Active
$1,649,900
3985 FLEMING ST, Vancouver Houses for sale, MLS® R2894834

Beds: 3Baths: 3Built in 20241745 sqft

15 hours ago

Beds: 3Baths: 3Built in 20241745 sqft

LIVE STRATA FEE FREE FOR 2-YEARS! Welcome to Format by Cressey - This...

$1,649,900

MLS®: R2894834 Oakwyn Realty Ltd.

15 hours ago

Active
$2,980,000
3941 W 33RD AVENUE BC, Vancouver, R2894813

Beds: 5Baths: 3Built in 19381996 sqft

16 hours ago

Beds: 5Baths: 3Built in 19381996 sqft

Quiet part of W33rd! MOST affordable and move in ready house in Dunbar!...

$2,980,000

MLS®: R2894813 Sutton Group-West Coast Rea...

16 hours ago

Active
$4,288,000
6210 LARCH ST, Vancouver Home for sale, MLS® R2894775

Beds: 6Baths: 7Built in 20243535 sqft

17 hours ago

Beds: 6Baths: 7Built in 20243535 sqft

This fantastic new luxury home is situated in the desirable west side of...

$4,288,000

MLS®: R2894775 RE/MAX Westcoast

17 hours ago

Active
$2,599,000
529 E 17TH ST, North Vancouver Real Estate for sale, MLS® R2894749

Beds: 6Built in 19522211 sqft

17 hours ago

Beds: 6Built in 19522211 sqft

Welcome to this turn-key Boulevard home. Enter through gates to manicured...

$2,599,000

MLS®: R2894749 RE/MAX Crest Realty

17 hours ago

Active
$799,000
1008 1188 RICHARDS ST, Vancouver Condos for sale, MLS® R2894822

Bed: 1Bath: 1Built in 1995740 sqft

17 hours ago

Bed: 1Bath: 1Built in 1995740 sqft

Large 740 sqft 1-bed corner home with great views! This condo has been...

$799,000

MLS®: R2894822 Framework Marketing Inc.

17 hours ago

Start your search with Richard Morrison, Top Award Winning Vancouver Realtor:

Contact Richard Morrison Top Vancouver Realtor today to find a Vancouver real estate and Vancouver condos for sale. This includes eastside residences and eastside apartment for sale. Also check out West Vancouver homes for sale or maybe an West Vancouver condos for sale. If you prefer North Shore, take a look at our listings in North Vancouver homes for sale and North Vancouver condos for sale.

Vancouver East Houses

Collingwood
Downtown East
Fraser
Fraserview
Grandview
Hastings
Hastings Sunrise
Killarney
Knight
Main
Mt Pleasant
Renfrew Heights
Renfrew
South Van
Victoria

Vancouver West Houses

Arbutus
Cambie
Dunbar
Kerrisdale
Kitsilano
McKenzie Heights
Marpole
Oakridge
Point Grey
Quilchena
SW Marine
Shaughnessy
South Cambie
South Granville
University
West End

Vancouver East Apartments

Champlain Heights
Collingwood
East Downtown
Fraser
Grandview Woodland
Hastings
Hastings Sunrise
Killarney
Knight Condos
Main
Mount Pleasant VE
Renfrew Heights
Renfrew
South Marine
South Van
Strathcona
Victoria VE

Vancouver West Condos

Arbutus
Cambie
Coal Harbour
Downtown VW
Dunbar
Fairview
False Creek
Kerrisdale
Kitsilano
Marpole
Mount Pleasant VW
Oakridge
Point Grey
Quilchena
S.W. Marine
Shaughnessy
South Cambie
South Granville
Southlands
University
West End VW
Yaletown
img

Richard Morrison

My name is Richard Morrison and I aim to empower people to buy and sell real estate in the most effective way possible. I can service all of your Metro Vancouver real estate needs & beyond. I specialize in Vancouver, North Vancouver, West Vancouver, Vancouver West, Richmond, Burnaby and other areas in the Lower Mainland BC Canada. You can be assured that whether buying or selling your home, I will get the job done. I offer a full compliment of real estate services with 15+ years of experience. About Richard Morrison

Related posts

Preparing A House For Sale For High ROI

Prepare Your Home For Sale Are you gearing up to sell your house and want...

Continue reading
by Richard Morrison

Legal Fees To Sell A Home In British Columbia

Navigating through the process of selling a house in BC, Canada can be quite daunting,...

Continue reading
by Richard Morrison

Tips For Selling a Home With Pets

Moving is stressful for everyone, including our furry friends. As a homeowner preparing to...

Continue reading
by Richard Morrison