Here’s Why You Don’t Want to Buy the Most Expensive Home in Your Neighborhood

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It’s a move that could backfire on you. 

Many people approach the process of buying a home by first narrowing down their neighborhood of choice. If that’s the route you’re going, it’s a smart one. That could help ensure that you end up with access to the amenities you want, whether it’s a great school system or being close to stores or the beach.

Now ideally, you’ll set a budget for your home purchase so you know you’re able to afford the mortgage loan you end up signing. But what if your budget allows you to purchase the most expensive home in the neighborhood you’ve landed on? Doing so might be tempting. But here’s why you may not want to buy the priciest home in the ‘hood.

You might spend more than expected

You might crunch the numbers and find that you can afford to buy the most expensive home in your neighborhood, even based on today’s mortgage rates. But remember, there are costs of owning a home you’ll face outside of a mortgage.

Your property tax bill, for example, might be higher if your home is valued higher. And that expense, coupled with a higher mortgage payment, might cause you to run into issues.

Also, a more expensive home might be costlier to insure. And if it’s larger, you might end up spending a lot more than anticipated on things like maintenance and repairs.

You might struggle to sell your home down the line

When you buy a home that’s already worth more than others in the neighborhood, you risk running into a situation where the value of your home increases at a slower pace than others. And that could be problematic if you decide to sell your home. Plus, there might be a maximum that buyers are willing to spend in that neighborhood.

In January, the median home sale price on a national level was $359,000, according to the National Association of Realtors. Let’s say the typical home in your neighborhood sells for about that much. Even if yours is nicer, and you can justify a $500,000 sale price, buyers may not be willing to pay that much to live in your neck of the woods.

Also, when you buy the most expensive home in the area, you risk having to sell at a loss if property values on a whole don’t improve. Let’s say your neighborhood becomes less desirable so that in 10 years from now, instead of the typical home selling for $359,000, it sells for more like $300,000. In that scenario, the value of your home won’t necessarily fall from $500,000 to $440,000 — it might fall to more like $380,000 or less.

Make your decision carefully

There’s nothing wrong with buying a more expensive home if you can afford one. But if that’s the case, you may want to consider moving to a neighborhood where the amount you’re looking to spend is more like the average. That could really make a big difference if you decide to sell your home down the line.

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