Who doesn’t love a nice house? Recently, I brought some buyer clients to a remodeled home and their eyes literally lit up. I’m not sure if it was the shine from the gleaming hardwoods or the killer marble backsplash, but something about that home screamed “buy me.” Without question, it was the most perfect house in the neighborhood. Despite the mega curb appeal, great layout, style and class, it wasn’t the right place for my sweet young clients. What was wrong with the house? Absolutely nothing — that was the problem.
If you’ve dreamed about having a particular type of property and you’ve worked hard to put yourself in a position to buy it, then who is anyone to tell you otherwise?
There’s an old adage in real estate that says don’t buy the biggest, best house on the block. While this message doesn’t apply to all people and in all situations, it certainly is sound advice for the general population of home buyers. Let’s explore …
Why Shy Away From Best on the Block?
If investment opportunity is one of the reasons why you want to buy a home, I would strongly caution against buying the best of the best. And here’s why:
What is your value play?
Appreciation is one of home buyers’ many motives. Although the real estate market is known for having short-term highs and lows, the general trend is upward. All homeowners hope to see an appreciation in value over the long-term.
Aside from waiting it out, you can increase the value of your home by improving the condition of the property. The concept is known as sweat equity: You can essentially force the appreciation through renovating or additions that make your house more desirable.
What do you do if your house is already the best it can be? It’s unwise to over-improve your property. You see, the best house sets the curve. The surrounding properties can rise up in the pecking order, but if your house is already top dog, where can you go from there?
From an investment standpoint, by buying the best house you are hanging your hat on appreciation and forgoing the sweat-equity option.
Who is the next buyer?
The other nagging question is who is the next buyer? The idea is to make money when you sell your home. This can only happen if a new buyer sees value in your property.
The neighborhood in which your property is located plays an important role. If your dime of a house is located in the worst part of town, buyers may be scared off by the neighboring properties. Even if they love your home, they may opt for a less impressive place that’s in a better area.
On the flip side, what if your beautiful home is in the most prestigious neck of the woods? In general, the buyer pool will be smaller as not everyone can afford the price tag of the best house on the best block. You might be waiting a long time for an affluent buyer to come knocking on your door.
When the Best House is Best
A home doesn’t always need to be about investing and making money. If you’ve dreamed about having a particular type of property and you’ve worked hard to put yourself in a position to buy it, then who is anyone to tell you otherwise?
There are ways to justify buying the biggest, baddest house. Let me rattle off a few examples:
- You work hard and want to come home to something amazing.
- Having the best house is something that you really value; you don’t want to compromise.
- The house offers certain amenities that you’ve prioritized and can’t find anywhere else. Perhaps you need an elevator to accomodate a spouse with a disability or horse stables for the little equestrian in your family.
- Heck, what if you want to buy a bomb beach house because #YOLO.
If Not Best, Then Worst?
Developers can make buying the worst properties and fixing them up look easy. In theory, the fixer-upper is a great idea. You purchase a run-down house and turn it into your masterpiece. Voila! As you can imagine, turning lemons into lemonade is not always as easy as it sounds. I would strongly warn against buying the worst house on the block without thoroughly educating yourself on the potential gains and pitfalls of the specific property. It could be a diamond in the rough, but it could also be a massive money pit.
Where Your Dream Home Lives on the Spectrum
Sometimes it’s not obvious whether your house is the best or the worst. And truly, these descriptions are subjective and based on the eye of the beholder. However, you can get a general sense of how a property stacks up by doing some basic research.
Study the neighborhoods: You can do an online map search of a location and narrow down by street. (Click on the map icon on RealEstate.com search results pages and then zoom in!) Review historical data to spot overall trends and compare price by evaluating listings for square footage, lot size, number of beds, number of baths, parking, cosmetics, age, etc.
Then put on your detective cap and start attending as many open houses and tours as you can to educate yourself about the micro market. This allows you to rank the homes based on your own criteria.
Hire a local expert: If you’re dead set on a certain town or area, than you should work with a local real estate agent who knows the ins and outs of the inventory. An agent who specializes in a specific geographical area can help you analyze listings, explain why properties sold at certain price points and add color to the story.
If you want to play it safe, it’s best to stay away from the two extremes and purchase a place that lies somewhere in the middle of the spectrum.