Should you buy the most expensive house on the block?
When looking at homes in the Columbia SC real estate market, one is tempted to buy the best home in a neighborhood. Should you buy the most expensive home on the block? No.
Think Long-Term
Assume you fall in love with the masterpiece home in a particular neighborhood. It has everything you could dream of: an incredible kitchen, top of the line windows, stunning brick work and so on. The sellers obviously put a lot of time, effort and money into the home. Accordingly, it stands out as the pearl on the block. Why wouldn’t you want to snap it up immediately?
Before you start signing documents, take a look at the sales prices of comparable homes, “comps”, in the neighborhood. If you compare the comp prices to the dream home, you should notice a pretty significant price difference. This difference should act as a metaphorical slap in the face or pouring of cold water over your head. The dream home is undoubtedly selling for a price range far beyond the comps. Warning lights should be going off at this point.
You are going to have a problem if you give into temptation and purchase the most expensive home on the block. In fact, you are going to have two problems.
The first problem is the appreciation of the value of the home in the Columbia SC real estate market. The appreciation on the best home in a neighborhood is always going to be dragged down by the structures around it. If you take a $900,000 home from a private community and put it on a block of $250,000 track homes, the $900,000 value is going to come down a lot because the neighborhood will not support it. When you eventually sell, buyers are going to look at the comps in the neighborhood and laugh at a $900,000 asking price.
The second problem is “hemming.” Since you own the most expensive house in the neighborhood, your appreciation potential is already limited. This becomes a bigger problem if you want to remodel or add on to the home. Taking such action would typically add to the value of a home. With the most expensive home, not only will it not add value, it may cut into your equity. Why? If you do a $50,000 remodel, you may see a $10,000 gain for your $50,000 cost. You just lost $40,000.
To avoid buying the most expensive house in the neighborhood, using the services of well qualified Buyer’s Agent who is knowledgeable in the types of houses and neighborhoods that interest you. If you show or tell your agent what you are looking for in a new house, they should be able to find it for you in a neighborhood that has many other houses very similar to it in amenities and price points. This will keep you from making the mistake of buying the most expensive house in a neighborhood in the Columbia SC real estate market.