You've just received word that your company is moving you. You'll sell your current home, but would it make sense to purchase again as soon as you move?

Contrary to popular belief, there are times when renting may initially make more economic sense. Before you jump into another home purchase immediately, evaluate the following:

1. How long is it estimated that you'll be in the new location? Here's an example that shows the merits of waiting to buy. Jim Johnson is a district sales manager for a software company and is being relocated out of state. His wife, Jean is a self-employed graphic artist. Their home sells quickly, so they jump at the chance to purchase another one. They make only a small downpayment on their new mortgage and decide to use most of their equity to pay off bills and redo the dated kitchen in the new house. But trouble strikes when Jim is again relocated six months later. With little equity in their home (and low property appreciation), they have to bring a check to the closing table! What could they have done differently? Knowing that Jim was on the fast promotion track, they might have held off purchasing, or at least negotiated with the company to cover some of their equity losses if relocation was required. And they definitely should have held off making major improvements to the house, costs that couldn't be recouped in the market value when they sold. Sadder still is the fact that the Johnsons had to save three years to accumulate their initial $10,000 downpayment to buy their first home. Now it's gone. And it may be another three-plus years before they can purchase again! When they do buy again, it may cost them more to obtain the house they want.
2. Look at the economy and the home buying market where you're moving. It's important to determine if the economy is stable, the rate of unemployment low and the number of employers expanding, as well as if real estate values have kept up with inflation. High unemployment means that a property could be difficult, if not impossible to sell. And the lack of property appreciation could signal that if a seller had held a property only a short time, down payment and closing costs for the purchase might not be recovered.
3. Consider the loss of tax benefits should you not purchase again. Before you wait too long to purchase again, remember the twenty-four month golden rule: If you replace your home with another of equal or greater value within a period of two years before or after the sale of the home, tax on the profit you make is postponed indefinitely. This advantage alone might make the risk of buying under less-than-perfect situations a sound economic move.

There's a lot to consider and many questions to ask about buying another home immediately when you're relocated. By evaluating the length of time you'll stay in the new location, as well as the local economy and your tax advantage picture, you'll be able to make a sound decision.