how soon can I sell after loan closes?

17 Replies

I want to make sure im not overstepping any laws or guidlines here.

I built a house out of cash. Refinanced into a coventiontal traditional mortage. I now have someone who wants to buy it. Can I sell with only lived it for 5 months or will that send red flags?

Hey @Wade Stahle great question. No mortgage fraud :) awesome that you built it from cash that’s what we want to do eventually.
You can sell anytime, no seasoning period or residency time required. Just be aware of capital gains tax and if you want to defer them have it set up for 1031 exchange prior to sell and save that $$ you earned
Good luck !

@Wade Stahle , sell away.  You're not doing anything wrong there.  Now doing a 1031 might be a different story.  If you sell this quickly  and try to do a 1031 you're running the risk that the IRS interprets that you built the property primarily to resell.  The only way that the 1031 works is if your intent was to hold for productive use.  If that's the case and you feel good about your documentation of that intent then a 1031 might be in order.

What many are failing to mention, is that even though you are perfectly within your rights to sell....your loan officer very well might get a huge fine from Fannie Mae for a loan paid off before the 6 month mark. Do your loan officer a solid and wait another month.

@Victor N. , Great catch.  Its' a spec build that @Wade Stahle moved into so there's no way for intent to be investment.   He's either got to wait 2 years residing there or pay tax.  The only difference is the amount of tax if sold prior to one year or after one year of ownership or the full tax free nature if he sells after two years of residence.

Yes, the lender gets s charge back from Fannie in the first six months.....they paid above par (above the UPB) and have no time to recoup the premium through interest.

Originally posted by @Wade Stahle :

Russell, if Fannie mae already controls the loan does that affect anything?

No. 6 months or the lender gets fined. Though Ive never seen it.. Ive heard stories of loan officers getting fired for a loan being paid off in under 6 months.

thanks Russell. So to be courteous to me lender I should close after that 6 months? Refi was closed December 22nd. Am I good to go June 23rd?

@Wade Stahle based on the info you provided you should be able to sell after living in it for 5 months, but I would reach out to you lender to verify that there are no penalties associated with a potential sale.