Why Buying the Best House in the Neighborhood Might Not Be the Best Idea

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When you’re on the prowl for a new home, you might want to think twice about buying the best house on the block.

Sounds counterintuitive, right? What could possibly be wrong with buying an awesome home?

The truth is, sometimes buying the best house on the block isn’t the best way to go, and here are some reasons why.

You Might Face Some Challenges if You Sell

Just because you’re in the middle of the buying process doesn’t mean you shouldn’t think about potentially selling some time in the future. When that day comes when you put your home up for sale on the market, it could be tough to find a buyer who’s willing to fork over the big bucks for the most expensive home on the block.

Someone just might buy the home at the price point you’re commanding. After all, you’re the buyer of that same home today. However, because the priciest home on the block is already at its highest value, there’s no room to boost your equity in it and increase its value.

There’s No Room For Improvement

If the home has already been upgraded to the point that it’s already a lot nicer than the neighbors’, any additional upgrades you make to the home will unlikely provide any return on investment for you.

It’s nice to have an awesome home with top-notch upgrades in it, but if you add too much than what the neighborhood calls for, you won’t get your money back for any additional expenditures you make to update it even more than it already has been.

A home is not only a residence, it’s also an investment, and the best investments are those that allow a lot of room for improvement.

Buyers will be less likely to offer you a much higher price for your home compared to the others when they can spend around the same amount for a home in a better location.

The Value of the Location Probably Won’t Improve

If you have to make the choice between buying the best home in a not-so-hot area versus a less-than-stellar home in a prime neighborhood, you should choose the latter. That’s because the value of the location is much less likely to change than the value of an actual structure. In the world of real estate, the true value is with the land that a home sits on. You can do all sorts of things to improve a structure, but there’s little chance of an actual location improving.

The majority of buyers who can afford large upgraded homes are more likely to look in more expensive neighborhoods. As a result, the best home on a block is often a bad investment and could make it tough to sell.

Resale Values That Have Nowhere to Go Limit Profitability

Buyers are typically more likely to dish out higher prices for new additions and upgrades, such as a new concrete patio, brand new kitchen countertops, or new hardwood flooring. However, every new feature increases the current price of the home.

When it comes time to sell years down the line, the ROI likely won’t be that great. That’s because all these upgrades get old and are subject to wear and tear, and as such, they lose their charm and their value. In order to increase the resale value, sellers will have to make new improvements yet again. Upgrades are required to get back that initially-hiked purchase price.

The increase in value of real estate can vary between different markets, but on average, they tend to increase about 3% every year. If you bought a home that was already in stellar condition, your resale value will be much less compared to a home that needed some TLC and the necessary improvements were made to bring it up to par.

The Bottom Line

Before you buy a home, you need to think about the investment factor in addition to how well the home fits with your lifestyle. Try not to let the best house on the block mesmerize you to the point of making a bad buying judgment. Make sure you consider how much you would likely be able to sell for in the future, and avoid the lure of an amazing home in a not-so—amazing the location.