I have this impression that it’s seen as a riskier decision to buy a home, knowing you won’t live in it long enough to pay off the mortgage and then sell it when you’re ready to move away, when compared to renting a home. Am I off base on that, and if so, why is this the case?
In: Economics
The realtor’s fee in most parts if the US is 5-6% of the sale price. Add another 1% for all the other fees. So if you were to buy a house and turn around and sell it for the same price the next day, congratulations you just lost tens of thousands of dollars and your realtor’s kid gets a nice car for Christmas.
Generally you want to hang onto a house until that 6-7% up-front cost is insignificant compared to the amount you’d have paid while renting. Other factors, like your mortgage interest rate, property taxes, and home value change matter too.
But generally speaking, buying a house for a year is a bad idea, you’re just giving the realtor a pile of money you could have spent on rent. Buying one for a few years starts to make sense, and buying for a decade or more is a win. But you don’t have to plan on owning it for the full 30 years.
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