How Owning the Best House in the Neighborhood Can Hurt your Resale Value

Did your Realtor® inform you that owning the best house in the neighborhood can hurt your home’s resale value? If not, you may need a better Realtor®! One of the strange quirks of real estate valuation means that the biggest, most beautiful house on the block might actually sell for less than it’s worth when you’re ready to move on. 

There are many wonderful reasons to buy the exact, perfect home you’ve been dreaming about, of course! Ultimately, the best house to buy is the house that makes you feel right at home. Whether that’s the largest, most updated house in the neighborhood or the smallest and oldest, resale value should never be your only consideration when purchasing a home in Houston. 

However, it’s important to have all the facts before you make such a big decision. If you’re searching for homes to buy in Houston, consider these reasons why owning the best house in the neighborhood could mean your investment may not turn out exactly the way you imagine it could!

1. The appreciation rate may be much slower than with other homes.

When we buy a home in Houston, we typically expect its value to increase over time. This is known as the appreciation rate. Unfortunately, the rate of increase will be much slower with the best house on the block than with other homes. In fact, most of the time the worst house in the neighborhood will increase in value much more rapidly than the best home in the neighborhood!

With the best house, the homeowner will be unable to make improvements that will have much effect on the value of the home. With the worst house or even a mid-range house, there are a lot more improvement options. But the best house has typically already been improved and updated as much as possible.

Related: Buying a New Construction Home: How It’s Different

Additionally, by buying the best house in your Houston neighborhood, you may also lose out on another value-increasing factor that the other homes in the area will enjoy—the boost in value that comes from other home sales in the area. In Houston, the value of a home is determined by how much money similar nearby homes sell for.

With a low to a mid-range house, you’ll receive a boost in property value when a higher-value home is sold in your area. But when you own the highest valued home in the area, there are no higher-value homes that can be sold to boost your value. If your home is worth $400,000, for example, and it is surrounded by homes that sell for $250,000, it will be difficult to find buyer comps that raise the value of your home.

2. You may struggle to find a buyer.

We’d all love to believe that we’ll live in the next house we buy for the rest of our lives. And sometimes we do! But for a variety of reasons, it doesn’t always work out that way. 

Sometimes we need to sell a home in Houston because we lost a job, because we got divorced, because we’re relocating for work, or just because it’s time to downsize—or upgrade! These are all great reasons to sell a home. Unfortunately, having the nicest house in the neighborhood can make this more challenging. Most buyers are not looking for the most expensive home in the neighborhood. That means you will have a much smaller pool of buyers when you start trying to sell.

3. The bells and whistles may not appraise at the value you’re hoping for.

Most home buyers in Houston need to work with a lender to get a mortgage. All lenders require appraisals to ensure that they are not lending money on properties that are overpriced.

As the owner of the nicest home in the area, you are in a tough position when it comes to the appraisal process. Appraisers are not going to value the bells and whistles in your home based on how much you enjoy them—they are going to evaluate them based on the current market.

They are also going to look closely at the surrounding neighborhood and at comparable sales. Since there are few sales to compare to when you have the nicest home, the options they have for calculating your home’s value would be limited to lower-value homes—and appraisers are not impressed by swimming pools, luxury brand fixtures and appliances, or unnecessary improvements that you love about your home. 

4. Where you live still matters.

The simple reality is that certain neighborhoods in Houston are more in demand than others. If you buy the nicest home in a less desired neighborhood, you may find yourself with fewer potential buyers when the time comes to sell. Families, especially, look for neighborhoods with great schools, parks, and other amenities that can’t be found everywhere. 

The surrounding neighborhood can have a big effect on your home value, even if you live in a grand mansion. If your neighborhood isn’t “hot” when you sell, you may be stuck with a great house that few buyers will consider. 

Related: Are More Houses Coming to the Houston Real Estate Market?

All these factors boil down to one decision: How important is resale value to you? When looking at homes in Houston, you need to decide if appreciation matters that much or not. Some buyers would rather sacrifice long-term wealth accumulation for better living day to day.

No matter what kind of house you’re looking for, the Houston real estate experts at Angel Fultz Realty can help! We aren’t looking to make a quick commission on a fast sale. Instead, we take pride in informing our real estate clients on every factor they should consider in their Houston home search. We’ll help you find and purchase the home that makes the most sense for you now and in the future.

Ready to get started? Contact us today! We’re standing by to send you a list of the top properties in Houston that match your personal purchase criteria.