subject: The Most Expensive Home, Should You Buy It Or Not? [print this page] It is always tempting to buy the home that stands out from the other homes when searching for one in a neighborhood. But should you buy this type of home? The answer? You should not.
Let's say that you saw a spectacular home in one of the neighborhoods where you have been searching for a house to buy. You've checked everything and they are really outstanding. There you can find your dream pool, with the floor made of marble, a kitchen that is suited for your cooking needs, state of the art windows and everything else that you are looking for. Of course, the dealers of this type of home really spent enough time and cash to be able to make it. With what you have seen, it is hard not to fall for it, right?
However, there are certain things that you should consider before buying that certain home. It is advisable that you study the 'comps' in that neighborhood, including the prices of the other houses that you can see there. If you have done this, you will have noticed that the difference is really huge, and it will feel like you are being cheated on. This magnificent home that you have wanted is available at a price that is way up higher than the comps.
If you let your wants take over your needs, the result will be two troubles later on. First off, you will have a problem regarding the value of your house and how you're going to appreciate it. This happens because of the structures of the neighborhood, since it may not be appreciated. Let's say you bough a home that is worth a million dollars in a neighborhood where most of the house are priced are just a quarter of what you have paid for. Even if your home is the most expensive, the neighborhood will not be supporting it. How? Because if you will sell it later on and tell the buyer about the amount that you have bought it for, in this case one million dollars, they will not take you seriously.
What the buyer will consider is the comps of the neighborhood. Secondly, you are going to encounter 'hemming.' What happens here is that when you are going to renovate your home, instead of adding value to it, you will just be losing a huge amount of money! Say for example you renovate for an amount of $50,000. You should be gaining a $10,000 value for it, right? But the fact is, because your home is very expensive, you will just lose the $40,000. The point is, the appreciation potential of the house you bought is limited to a certain extent.
As what was said earlier, buying the most expensive home in the neighborhood where you are at is not at all advisable. This is more so when you don't know the comps of your target area, and when you are clueless as to what's going to happen in the future.
