Three Reasons Not to Buy The Best House on the Block
House hunting? Found the perfect house right in the area you wanted to find the perfect house and it doesn’t need a lick of work.
HUGE SCORE, RIGHT! Not so fast.
Before you make an offer it’s a REALLY good idea to take a look at the rest of the neighborhood and see how other prices compare to the home you are considering making an offer. If those houses aren’t as nice or perhaps falling into disrepair you may want to rethink your decision. Most realtors will alert you to potential pitfalls—but you don’t want to buy the most expensive house in the neighborhood.
So, here are three reasons not to buy the best house on the block.
1) Someday You’ll Have to Sell It
While your head may be in beast-mode when you find the “perfect” place, it’s easy to let emotions get in the way, especially when you consider that the house you are buying today will be the place you are selling tomorrow. When that time comes, remember, you will be trying to sell the most expensive home in the neighborhood which will likely be a challenge.
You’re home is a big investment but life happens—people change jobs, get married, have kids or other desires and all of the sudden your investment becomes a burden. In the back of your mind you’re thinking someone will buy it—heck, you bought it, right? The obstacle you’re up against here is that there’s no way to increase the equity in your home. With it already being nicer than everyone else’s, any upgrades you put in it will exponentially raises your asking price and that unbalance between your home and the neighbors will send most buyers walking.
Best case: it holds it’s value. Worst case: you’re stuck with it.
2) No Guarantees the Neighborhood Will Improve
Sure, prices are on an upward trend now so, if you buy the priciest house in any particular neighborhood, you’re potentially gambling on a volatile market and the odds are against you.
Ideally, you’d find your home in an up-and-coming neighborhood and over time the homes around you would improve, building equity in your house and your neighbors. Because the area has improved, your value will still increase, thanks to gentrification, but unless you have a good psychic on your payroll there will be a lot of other homeowners in the same boat as you—overpriced and unsaleable in a middling neighborhood.
If you're looking to live in a neighborhood with potential, buy a lower-priced house, at least you can improve the interiors and make it more valuable and if the neighborhood doesn't actually “up-and-come” your expensive home is already as practical as it can be.
Sometimes, betting on your home can pay off, but risking your home—that strategy could sacrifice everything.
Best case: you’re disappointed. Worst case: bankruptcy.
3) Leave Room for Improvement
As I said earlier, a home’s an investment and the best investments have the most room for improvement. Ideally, you'll be adding to your home while you own it, building equity in hope of a payoff when you do sell.
That's why we’d recommend buying the most wanting house in the best neighborhood you can find. You can add value on your own but if you're choosing between an awesome house in a less-than-desireable location or a less-than-desireable house in an awesome location, I would choose the latter.
Please note, improvement doesn't necessarily mean a complete renovation. Even the small improvements after you move in will increase value. We're talking regular maintenance, refreshing the paint, and fixing the odds and ends that might go ignored. But if your home is already priced well above the rest of the neighborhood, those tiny changes won't make a lick of difference.
Best case: you make a nice profit. Worst case: tennis elbow.