hen looking at homes, difference. This difference
one is tempted to buy the should act as a metaphorical slap
best home in a in the face or pouring of cold
neighborhood. Should you buy the water over your head. The dream
most expensive home on the block? home is undoubtedly selling for a
No. price range far beyond the comps.
Warning lights should be going
Think Long-Term off at this point.
Assume you fall in love with the You are going to have a problem
masterpiece home in a particular if you give into temptation and
neighborhood. It has everything purchase the most expensive home
you could dream of: black bottom on the block. In fact, you are
pool, marble, an incredible going to have two problems.
kitchen, top of the line windows,
stunning brick work and so on. The first problem is the
The sellers obviously put a lot appreciation of the value of the
of time, effort and money into home. The appreciation on the
the home. Accordingly, it stands best home in a neighborhood is
out as the pearl on the block. always going to be dragged down
Why wouldn't you want to snap it by the structures around it. If
up immediately? you take a $900,000 home from a
private community and put it on a
Before you start signing block of $250,000 track homes,
documents, take a look at the the $900,000 value is going to
sales prices of comparable homes, come down a lot because the
"comps", in the neighborhood. If neighborhood will not support it.
you compare the comp prices to When you eventually sell, buyers
the dream home, you should notice are going to look at the comps in
a pretty significant price the neighborhood and laugh at a
$900,000 asking price. $50,000 remodel, you may see a
$10,000 gain for your $50,000
The second problem is "hemming." cost. You just lost $40,000.
Since you own the most expensive
house in the neighborhood, your Dream or Nightmare
appreciation potential is already
limited. This becomes a bigger Unless you can accurately predict
problem if you want to remodel or an increase in valuations for an
add on to the home. Taking such entire neighborhood, you
action would typically add to the shouldn't buy the most expensive
value of a home. With the most home on the block. If you do, the
expensive home, not only will it dream home could quickly turn
not add value, it may cut into into a nightmare.
your equity. Why? If you do a
About the Author:
Raynor James is with http://www.fsboamerica.org - providing FSBO homes for sale by owner. Visit our "sell my home?" page at http://www.fsboamerica.org/seller.cfm to list and sell your home for free for one month. Visit http://www.fsboamerica.org/buyer.cfm to see homes for sale by owner.
Source: www.isnare.com
