Buy The Most Expensive House In The Neighborhood?
By Raynor James, Fri Dec 9th

When looking at homes, one is tempted to buy the best home in aneighborhood. Should you buy the most expensive home on theblock? No.

Think Long-Term

Assume you fall in love with the masterpiece home in aparticular neighborhood. It has everything you could dream of:black bottom pool, marble, an incredible kitchen, top of theline windows, stunning brick work and so on. The sellersobviously put a lot of time, effort and money into the home.Accordingly, it stands out as the pearl on the block. Whywouldn't you want to snap



it up immediately?

Before you start signing documents, take a look at the salesprices of comparable homes, "comps", in the neighborhood. If youcompare the comp prices to the dream home, you should notice apretty significant price difference. This difference should actas a metaphorical slap in the face or pouring of cold water overyour head. The dream home is undoubtedly selling for a pricerange far beyond the comps. Warning lights should be going offat this point.

You are going to have a problem if you give into temptation andpurchase the most expensive home on the block. In fact, you aregoing to have two problems.

The first problem is the appreciation of the value of the home.The appreciation on the best home in a neighborhood is alwaysgoing to be dragged down by the structures around it. If youtake a $900,000 home from a private community and put it on ablock of $250,000 track homes, the $900,000 value is going tocome down a lot because the neighborhood will not support it.When you eventually sell, buyers are going to look at the compsin the neighborhood and laugh at a $900,000 asking price.

The second problem is "hemming." Since you own the mostexpensive house in the neighborhood, your appreciation potentialis already limited. This becomes a bigger problem if you want toremodel or add on to the home. Taking such action wouldtypically add to the value of a home. With the most expensivehome, not only will it not add value, it may cut into yourequity. Why? If you do a $50,000 remodel, you may see a $10,000gain for your $50,000 cost. You just lost $40,000. Dream orNightmare

Unless you can accurately predict an increase in valuations foran entire neighborhood, you shouldn't buy the most expensivehome on the block. If you do, the dream home could quickly turninto a nightmare.

About the author:Raynor James is with http://www.fsboamerica.org - providing FSBOhomes For Sale By Owner. Visit our "sell my home?" page athttp://www.fsboamerica.org/seller.cfm to list and sell your homefor free for one month. Visithttp://www.fsboamerica.org/buyer.cfm to see homes for sale byowner.

Here are some more For Sale By Owner articles...