Buying The Best House In The Neighborhood?

(March 21, 2017 )

You’ve been house-hunting and you’ve found it – the perfect property aka The One!

It’s got the perfect amount of bedrooms, perfect size, perfect architecture, perfect garden, perfect pool, perfect everything! So what if the price is higher than every other house in the neighborhood?!

This kind of opportunity only comes along once in a blue moon, so you should snap it up! Right?

Wrong! Wrong! Wrong!

Real estate experts for once will all agree without exception: even if it’s the mansion of your dreams, the best house on the block might not leave you in the best position! Here are 4 reasons why you never buy the best house in the neighborhood:

Reason #1 – To buy the best house in the neighborhood will mean your value will increase at a snail’s pace.

All things being equal, the value of your property will increase. Eventually! Compared to the worst house in the neighborhood, the increase in the value of the best house will be a rather slow one. This is because every improvement in the worst house will add value immediately. However, the home improvements you will make in the best house have no power to affect drastic increases in value! For example, you might find the worst house on the block increasing in value by as much as 20-30%. In the same period, the best house might increase by not even 5%. Also, if your house is in the mid-range, sales on the same block of a higher value will boost your property value. If your house value is at the top of the pile, there will, of course, be no higher sales in the area. So, unfortunately, no benefit to your house value!

Reason #2 – To buy the best house in the neighborhood will prove quite the tough resale one day

Sure, you might think you are moving in for life right now! Or at least for the medium-to-long term. But many buyers don’t realize that there may be major changes to your circumstances. For example, there may be a career change that requires relocation; a sudden change in family situation (i.e. divorce) or financial troubles.
Those kinds of changes are exactly the ones which result in the (unexpected) need to sell. If yours is the best house in the neighborhood, there are many reasons why it may be difficult to resell. For one, there is the value issue described above. For another, the majority of the market tends to buy in the mid-range of the desired area. This means that there will be a smaller pool of buyers looking at the top house on the market in that particular area. Is the house surrounded by unattractive properties? You better hope not, because, even if the house itself is quite the looker, you will battle to sell it if it’s surrounded by eyesores!

Have a look at what’s next door: apartment buildings, parking garages, homes in disrepair, shabby, unkempt gardens, landscapes or verges, even rented homes next to your mansion will all be big turnoffs for your prospective buyers.

Reason #3 – To buy the best house in the neighborhood won’t affect whether the overall area will improve (or not)

Nobody has a crystal ball – at least not one that can actually predict the future. You might think that the neighborhood is up-and-coming. And you’ve clearly placed your bet with the action to buy the best house in the neighborhood! However, buying the best house is still a major gamble. There is always a chance that the market will stagnate or even decline! You thought there would be an improvement, but instead, you are now stuck at the top in a neighborhood where prices are sliding every quarter. And now?

Reason #4 – To buy the best house in the neighborhood purely for bragging rights is still overrated

Someone might say: “Okay, okay – I see what you’re saying, but it’s still worth it to me to buy this place – it’s AMAZING. I’ll be able to tell my friends there’s no-one in the neighborhood with a better house than me. And that I bagged the most expensive house to boot!” Maybe the above reasons haven’t convinced you about the harm to your pocket in the long run. And maybe you’re all about impressing your friends. Think about this: your neighbors will be laughing at you for paying much more for your place than they did. Guess who will be called the sucker now?

Closing thoughts

Considering the points above: what is a better course of action?
Take a look at what you might be able to afford in a better neighborhood at the same price.
You could even go lower in price!
Immediately invest the balance into some home improvements.
Doing so will increase your equity right away!
Just don’t keep improving your home until it’s the best in your new neighborhood!

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