For anyone following along for updates - my spouse is agreeable to selling immediately after or very soon after completion depending on how much we can sell the home for. This won’t be for several months so standby to see how this unfolds.

I agree with the poster who've said what makes you think you will be able to sell the house so quickly. If you feel that the living spaces are pretty much inadequate - so will a buyer.

shirlpp - if the market is at the time of sale as it is now, this house will have no problem selling. Like all things, something we don’t like will be something another family/person loves. This is also in a really sought after community. The only thing that will work against me if we decide to sell is a market that goes upside down. And in that case, at least we have the house and it is what it is. Thanks for your contribution.

Like all things, something we don’t like will be something another family/person loves.

I agree...Best Wishes!

There is ALWAYS a chance for a market to go upside down in two years. There is ALWAYS a chance for a market to go gangbusters in two years.

Yes Mark. You’re right. I’m assuming gangbustering would be a good thing lol and upside down obviously is bad. Hoping for the best and understanding that the absolute worst would be what? We have a brand new house to live in and I’ll make it work. It stuck with me from another poster that not all homes are a forever home, life moves and you move with it.

Even though I have not seen many indications lately, I like to think things will be better in two years than they are now.

You are going to be fine. :) You sound like you've got a good head on your shoulders and you will see where things are at when the house is done.

Only you know yourself. I know for me, if I allowed myself to bail on every home after I reach this stage, I'd be selling a home about once a year. Ha. I personally go through this period of...I'm not sure what to call it. Buyer's remorse, or mostly just a letdown period when all the things about the house which aren't PERFECT start to bug me.

It's hard when you spend so much money on something and then all the faults become apparent. You hope for things to be PERFECT and then reality hits.

Because I know this about myself, I work through it. (And fortunately for my spouse, this only applies to huge financial purchases and not personal commitments. So he seems safe. LOL...)

If this is not your typical MO, and you don't normally have buyer's remorse - then sell the darn thing. Life is too short to life in something you hate, as long as it won't financially bankrupt you of course. If the market is still rising, and you can sell at a profit after all fees and cap gains (if they apply), and you just know you're going to hate it no matter what - chalk it up to lesson learned and move on. :)

I too would love to hear how thing finally ends up resolving, if you don't mind.

You will likely pay $200k more for the next house, so don’t get too excited about what you think is a windfall.

Not looking for a windfall - looking for a different house. And do anticipate using part of that $ to apply to the new house. The alternative is rent it out. We shall see.

If the housing market goes down, then the next house that you want to buy will also go down. And if you will be buying a more expensive house then it will go down even more than the one you are selling. So you don't need to worry about that.

I still do wonder how cramped the main floor could be on a 3500 square foot house. My 2900 square foot house seems spacious to me, and has even accommodated a wheelchair user with room to spare. Is it possible that the neighbour whose house you saw simply had the furniture arranged very badly to make it look cramped?

But I guess that if you don't like the floor plan then you don't like it.

My spouse said exactly that partim - we won’t decorate like that person so don’t overthink that. I was literally suffocating and could sit on the dining room table from the living room - I’m not being dramatic. I had already decided less is more on the first floor. No matter how this unfolds You all have helped me be more excited about things to come. Even just walking in for the first time will help define my feelings and what happens next

I think the problem is you did not post your house design here on Houzz for it to be ridiculed, torn apart, scorned, criticized, put down, insulted, and receive good suggestions before you started construction.

(maybe this one will make the Year In Comments for 2022?)

You are right Mark! I’ll do that next time though lol

With all due respect to the advice here, you really need to find a professional who is required to give you good advice. If you sell immediately after you purchase for significantly higher than you purchase price you are going to have some significant penalties.

You are going to have the realtor commission on the entire selling price which is usually 6%, the loan origination which are usually 1% of the loan you used to buy the house, all other closing costs, and the gain will be a short-term capital gain and taxed at your regular income rate. Assuming you are married filing jointly your top end rate is going to be at least 24% on a $200,000 short-term capital gain for Federal alone, plus whatever your state is. You are also going to have to start worrying about phase outs for various deductions and credits.

I strongly suggest you find someone in your area to run an actual analysis using actual realistic numbers for your situation rather than a bunch of internet strangers making up numbers and making assumptions. I would personally recommend a CPA who does financial advising/planning.

ETA: You might discover reaching some accommodation with your builder is your best option where he agrees to sell the house to a third party and move your money to a different house. He can make more profit from this house and the next while you limit your loss. However, even with all the penalties if your house has appreciated enough, you should sell it after it is purchased.

I agree with you, @partim. My house is 3800 to 4000(depends upon who is measuring) with 4 bedrooms and two and a half baths and it is very spacious.

@bry911 thank you. My CPA advised of all of this. And also advised that an alternative is to rent the property through the first 2 years to avoid the cap gains and other issues. The RE commission is a non-issue. We have a nice agreement with our realtor to mitigate much of this. This was primarily a vent post - but I do appreciate all of the valuable perspectives, feedback, support, and yes - a few virtual slaps on the back of my head - received :)

How the heck do you tag someone by username here?

A word on housing market appreciation as it is so often misunderstood... Housing market appreciation is great when you are moving to a cheaper house, it is fantastic when your new residence is a pine box, and the rest of the time it is only great if used properly and can actually be bad.

Most assets appreciate based on their value rather than at a set dollar amount. So when your $300,000 house goes up by 20% you have $60,000 more wealth. However, suppose a home that you really wanted was $500,000 when you purchased your home, it will also increase by 20% and be worth $600,000 now. So while your home has gone up in value, you are actually further from being able to buy the home you wanted. Now if the situation were reversed the less expensive home would be more affordable.

Having said that, leverage throws a wrench into the analysis. Since most homes are purchased with leverage, the amount you have for down payment is disproportionately important to what you can buy. So if you purchased the $300,000 because you only had $60,000 for down payment, but now have $120,000 in hand (ignoring realtor fees), you can lever that to buy more house.

Whenever my house appreciates in value, I do a cash out refi and invest that money. Which is fantastic as that builds real wealth given enough time. However, for most people who just pay their house down and don't pull cash out to invest, it is not so fantastic. It is mostly useless unless your next house is much cheaper.

Thank you bry

@Nikki Bicks -- type "@" and then start typing their name. A list will pop up (and you must click on their name). Please post your floor plan -- we're all hoping we can help you rearrange furniture to make it work for you!

@Nikki Bicks said, "My CPA advised of all of this. And also advised that an alternative is to rent the property through the first 2 years to avoid the cap gains and other issues. The RE commission is a non-issue. We have a nice agreement with our realtor to mitigate much of this."

I am sure your CPA gave you good advice, but the things you wrote don't seem correct. You can only avoid the capital gains tax using the Section 121 exclusion if you have lived in the house for two of the last five years. Recently, they made it so that you must live in the house for the two years prior to renting it and not vice versa.

You can get the better rate for long-term capital gains tax by waiting 12 months after purchase to sell but it doesn't matter if you rent it or not.

The realtor commission is split between the buyer's realtor and seller's realtor as well as their respective brokerages, so unless your realtor is acting on both sides with the approval of their broker, they can only reduce the commissions and not remove them. I would be surprised if you can get commissions reduced by more than 1/3.

Bry - I fully understand the financial implications, potential pitfalls, and potential opportunities with such a decision - renting, holding, selling or otherwise. I have a realtor, RE attorney and CPA who have talked through every possibility with me and advised as to my options: If I’ve given any indication that I’m confused or unsure of what those options are or their impact, take it with a grain of salt. Thanks again. Feel free to keep watch for an update if you’d like.

@Nikki Bicks - While my comment was in response to yours, its purpose was really just general information. These threads are often found by people in similar situations to you, and they may not have engaged the proper professionals. So as I mentioned, I am sure you got great advice, but I wanted to ensure that other people wouldn't take what you wrote as their great advice.

Good luck

I understand @bry911. I think, and hope this thread as a whole will be helpful to others in the future

It can be hard to get a sense of spaces in new construction, especially if you're a few months out. My brand new house is small (3/2, 1422 sf, you'd probably hate it) but some of the spaces felt downright TINY during framing and walkthroughs. Never mind all my furniture worked on paper when I drew it up, I thought I'd made a huge mistake. Now that the kids and I are here, I see I was panicked about nothing. The loft I was afraid wouldn't hold two desks comfortably for my kids - plenty of space! The kitchen/dining combo that seemed a little tight for traffic? Pivot the table and it works great now! This is not to minimize your concerns, just to say it's probably really common to not be able to fully "understand the space" I guess, when it's not all set up. I suppose that's why the pros get paid the big bucks 🙂

Quoting myself:

“When there is an empty site it looks perfect.

When the hole is dug it looks big.

When the foundation goes in it looks small.

When the first floor sheathing is put on it looks big.

When the stud walls go up it looks small.

When the gypsum board is installed it looks big.

When the furniture goes in it looks small.

When you write the final check it looks huge.”

Other posters know the rules much better than I, but check the details carefully before you rent the house. I am not aware of a program which avoids capital gains on rental real estate. Paying the taxes on the appreciation seems to be an expensive way to improve your situation. Approaching the builder to see if they have any ideas to allow you to purchase a different property without losing the entire property appreciation is a good start. Until you inquire about possibilities, don't dismiss the idea. It is certainly possible that another customer has been calling them every week trying to find an almost finished house and willing to pay a premium price to get possession quickly.  

Calculate the expected financial hit of an immediate sale and then divide that cost by the time required…are you willing to pay perhaps $150 every day for two years to not live in that house? How long woud you need to delay retirement to pay the taxes and selling expenses?

@lyndee lee We will not avoid cap gains by not living in the home for at least two years as primary residence- rental or otherwise. I’m aware of exactly how much this will cost. There are other (somewhat beneficial) factors at play here that I haven’t shared. But do know that I do know we are talking a large amount of money to do anything with this house other than move into it and live in it. Which if it comes to that I’m fine with. For some reason tagging isn’t working for me. Drats.

@Nikki Bicks - keep trying -- type the @ and then without a space, the first letter of their name. A list should pop up and you highlight the correct name.

My apologies for misunderstanding the scenario. If the financial impact of the decision isn't going to require you to adjust your lifestyle or retirement plan, then don't let the financial aspect trump your life satisfaction.  

I have a real estate investment in a large property I bought with the intention of rehabbing for a specific type of rental.  After I took on the project, my husband retired and my interest in hands on construction and management has waned. I had to move away from the numbers on paper and look at how I want to send my life energy. If I dump that property, the  financial impact won't change my life and I can use my time to pursue new opportunities. I don't need to make the decision which results in the highest amount of money in my pocket because additional funds won't change my lowkey lifestyle. I am trying to approach decisions from the perspective of what am I giving up rather than just looking at dollars and cents. I have made mistakes by being too stubborn to dump a project where the end result was fantastic but not deserving of the effort expended.

Buyer's remorse is a real thing. We have all experienced it to one degree or another. If you don't like what you have selected or the position you find yourself in, change it. The great news is you have options. Some of these options are really good.

You could walk away from the project, release your claim and lose whatever money you have deposited. I don't think there is any good reason to do this.

I would approach the builder and request to be released from the contract. They don't have to do it, but if things have appreciated to the degree you have described, it would be to their advantage to release you from the contract with no penalty. They would make a handsome profit on the subsequent sale. My guess is they would jump on this. It is to their advantage. While you would avoid a loss, you would lose any gain and avoid any capital gains taxes.

Another option is to complete the house and sell immediately upon completion. Yes, there would be short term capital gains and expenses to be paid. The good news is you have a capital gain and a profit. That's a good thing, not a bad thing. Consider it to have been an investment. In order to do this and achieve maximal profit, you should never move in. This is when the property will see its maximum profit based on age and condition. Market demand will be your friend. Someone will be happy to buy it in new condition with no wait. Your realtor can help you with this process.

The last option is to complete the sale and live in it long enough to avoid capital gains. Are you willing to live somewhere that you don't like in order to avoid paying a tax on a profit? Only you can decide.

Real estate should always be viewed as a business decision using business metrics. Emotions should be removed from the decision.

We all make choices. One of those choices is how we view a glass of water, half full or half empty. In your case, you have so many good options, I'd make a conscious decision to make this process half full. Of your choices, if it were me, I would sell upon completion, pay the tax and move on with my life.

"Real estate should always be viewed as a business decision using business metrics. Emotions should be removed from the decision."

I respectfully disagree. Although there are economical aspects to a house, it should most importantly be a home, personal, inspiring, accommodating, functional, beautiful, memorable, comfortable, and most of all loving. I have found, personally and professionally, a good home influences the lives of those that experience it. A home is more than a shelter or financial tool, is a vehicle for an enhanced life.

Mark,

Spoken like an architect. Of course, good architecture is inspiring and amazing. Unfortunately, most residential architecture does not meet the metric of inspirational or amazing.

Years ago, I had a realtor explain to me that a home must "sing to you". Personally, I've heard music in a couple of my past homes. For this buyer, there is no music. Therefore, she should treat the situation from an economic standpoint. This frees her up to finding a home where music abounds.

Nikki Bicks, Now that you and your spouse have come to the decision that you will sell the house upon completion, you need to engage an experienced realtor right now to develop a marketing plan to sell the house as soon as it is completed.

Good luck finding a home that sings.

Wow that's a really long list of things that a home should be! I've owned 2 homes - the first one very small and new, the second one large and a real fixer-upper for the first years we lived there.

Both have been functional, comfortable and loving. I guess they have been accommodating if that means the same as functional. I wouldn't say that either of them have been inspiring, beautiful or memorable.

And very important to me, they were affordable. Living in a city with high housing prices (Toronto) I've seen the stress experienced by house-poor people who just "couldn't stand" living in a house with a dated or unfashionable style.

With all due respect, houses need to be different things to different people who are in different situations. Sometimes houses are purely financial decisions, at other times a house may be completely a location decision, and sometimes a house needs to be based on how it lives for you.

My house doesn't of the stuff on that list and I am a fan of a lot of on that list. What my house does very well is enables my wife and I to both conveniently and quickly get to our jobs, it allows me to have a large workshop, it is close to great dining and shopping. Really, my house adds hours to my day by shortening the time I spend driving.

For those wondering how a 3,000 sq. ft. house can seem small, it's a matter of math. Assume it's a traditional home, equal square footage up and down. The ground floor is 1,500 sq. ft.

With the small lots so common today, the garage is part of the ground floor. In Nikki's case it's a three-car garage, so call it 20' by 30', or 600 sq. ft.

So the ground floor is 1500-600=900 sq. ft. Divide that up: kitchen, pantry, powder room, laundry, mud room, family room, living room. It's not hard to see why Nikki doesn't have a dining room!

That's why many older homes had the garage detached, sticking out, or in the basement. And that was when kitchens were smaller and didn't require an island the size of Nantucket!

Total living area is 3580. Upstairs is approx 2000 of that. Downstairs is the difference but there’s a bathroom and bedroom on that floor included in the livable sq footage. The garage is about 630 sq ft of non livable space on the first floor

Where I live the square footage of the house only includes finished above-ground living space, so the garage would be excluded even if it takes up space within the main floor box. Sounds like it may be calculated differently in other places and the garage would be included in the OP's 3500 sf figure (not 3000 sf).

Doesn't really matter though, since the OP doesn't like the layout because of the small formal dining room.

You can use the new construction home now to help plan what you will want next. Start planning and making notes. You can measure and get the feel for the spaces in the new house. You can think about how they might be changed. You have a full scale space to test things out. . . .Begin now to get what you want.

Not sure where you are in the building stage. Can you alter the plan a bit? Please post the plan..

I've modified many houses that were in construction. Its probably not feasible to make it larger but a house can always be made more livable.

For those following this thread I promised to keep it updated. The latest is that I’ve been doing some self reflecting and trying to practice more gratefulness in many areas of my life, this being one of the biggest. I’m more excited about moving into this house than I was the day I made this post. I still don’t think it’s the forever house but I don’t think I’ll be looking to move out, rent it, or sell it as soon as I get the keys. Thanks to you all for your advice - I promise to keep updating with the next time being when I actually move in. Fingers crossed for a smooth process.

Thanks for the update, @Nikki Bicks. It's good to hear that you are feeling better about the house at this point. Who knows, after living in it for awhile, you might just fall in love with it, if you focus on the good.

I went house hunting years ago, only to discover how nice my house was. Good luck, hope all turns out well.

@Nikki Bicks Growing up in military, we moved plenty of times. So as an adult, I often suffer from itchy movitis. Every house/apartment I have lived in, however, no matter what, becomes something I love--because honestly, for us (I know we are all different), we really only live in three rooms--the only thing I really struggle to tolerate in a home is darkness. I need sunshine streaming in. Glad to hear you feel better...

My heart feels you. I keep trying to count the blessings and boy I ended up knocking walls down . It helped with a crazy boxed in room so I didnt have a nervous breakdown looking at it. I am still working on it and It is like Back peddiling . I bought a model and sold everything. Now that was double trouble and effort. Yeah. I think if you start to chose the colors you love and things you like in furnishings and drapery it might help calm you . I see that has helped me alot and I do have a beautiful view and I do have size location I need. I am trying to love my home too! Looking back its already gone up in value so that is good too. Pick your battles and put things that you like or love that make you say Oh that is nice and eventually you will start to like it more

Oh and Houzz designers are so helpful with suggestions. It really helps alot

Nikki, how are you liking the house 1/2 a year later?
I am currently having new build fatigue, panic which is turning into hate