Read This Before Buying the Most Expensive House in Your Neighborhood

By: , Contributor

Published on: Nov 19, 2019 | Updated on: Nov 26, 2019

The best house on the block might not be the best investment.

When you're hunting for a home, you may be tempted to buy the most expensive house in the neighborhood -- not because you're looking to show off, but because that's the home you happen to fall in love with due to its size, features, or location. But before you do, be sure to understand the pros and cons of going that route. 

Advantages of buying the most expensive house in the neighborhood

It often pays to buy a home that’s valued higher than the homes that surround it. Here’s why. 

1. You might spend less on improvements

When you buy the most expensive home on the block, it often means you're getting the nicest home on the block. The result? All the amenities you're looking for. If the house you buy is in top shape, you won't have to spend a lot of money on home improvements once you're living there. That could take a load off your mind, not to mention spare you the hassle of living in the middle of a construction zone when projects are underway.

2. Higher resale value

Buying the most expensive house in the area also means you'll potentially get to command top dollar when the time comes to sell it. Imagine that your home has more square footage than any other house on the block or that you end up buying the one home in town with a finished basement. If you live in a neighborhood that's family friendly and you sell later on, that added space could be a major draw for families with multiple children who are willing to pay top dollar.

3. Less pressure to keep up with the neighbors

If your budget allows you to buy in a pricier area but you stick to a neighborhood where homes cost less, you'll be less stressed about keeping up with your neighbors. 

Say you can afford a $300,000 home. In one neighborhood you're looking at, that'll buy you the worst house in town, but in a second neighborhood, that means buying a home that's the most expensive. You may feel better about your financial situation by buying the more expensive home in a cheaper neighborhood -- think of it as the “big fish in a small pond” mentality. 

Not only that, but by avoiding a pricier neighborhood and buying a nicer home in an area that’s not as fancy or desirable, you’ll be less tempted to stretch your budget to an unhealthy extreme to keep up with your fellow homeowners. That could, in turn, spare you a load of unhealthy debt. 

Downsides of buying the most expensive house in the neighborhood

On the other hand, there are plenty of good reasons not to buy the priciest house in a given neighborhood. Here are a few to think about.

1. Trouble with resale

If you buy the most expensive home in town, you may have trouble finding a buyer once the time comes for you to sell. Often, homeowners buy property thinking they'll live there forever, but that may not end up being the case. You could get a new job in a different state or end up moving for reasons relating to climate or family. At that point, you'll need to find a buyer who's willing to purchase a home that may not increase in resale value -- and that's not necessarily an easy thing to do.

In fact, that leads to a related point: If you buy the most expensive home in the area, its resale value may not increase by the time you sell it. And depending on how circumstances shake out, you may end up selling that home for less than what you paid for it. Keep this risk in the back of your mind as you make your decision. 

2. The improvements you make may not add value

Buying the most expensive home in the neighborhood might give you a nice space, but that doesn't mean it'll be perfect. Chances are you'll want to make some changes.

But if you make home improvements, you're less likely to increase your home's value in the process. If it's already priced high for the neighborhood, there may not be any more "up" to go. Of course, there’s nothing wrong with putting money into renovations for your own enjoyment -- but if you’re financially motivated to do so, you may not get the results you want. 

3. You could get stuck with hefty property taxes

Buying the most expensive house in the neighborhood could prove problematic from a property tax perspective. Property taxes are calculated by taking the assessed value of a home and multiplying it by the applicable tax rate.

While property taxes tend to rise over time, it's possible to appeal them by proving that your home is overvalued. You can generally do so by finding comparable homes in your neighborhood that have sold for less or that are valued at a lower price. But when you own a house that's far more expensive than those around it, coming up with those comparable homes becomes difficult. The result: You get stuck with higher property taxes in the long run.

4. That home could end up costing you more to maintain

The most expensive home in the neighborhood probably costs more for a reason -- namely, that it’s larger and has higher-end features and appliances. That could make for a nice lifestyle, but it could prove costly with regard to upkeep. After all, it costs more to heat, cool, and maintain 3,000 square feet of space than to do the same for a 2,000-square-foot home.

Should you buy the most expensive house in the neighborhood?

Before you buy the priciest house in town, take a look at where it falls within your personal price range and determine how affordable it really is. 

Imagine you're looking at homes between $200,000 and $300,000. Maybe you can technically get approved for a mortgage that lets you hit the upper end of that range, but will doing so cause you long-term financial stress in other areas? If so, you may want to spend more conservatively on a home, especially if it's your first time buying. 

Another thing to think about is why the home you're thinking of buying is the most expensive one in town. Is it because you're looking at an up-and-coming neighborhood whose home prices are likely to grow over time? Or is it that you're looking at a neighborhood that's not that great overall? 

Imagine that you're dealing with the second scenario and you have kids who need a good school district. If the neighborhood you're thinking of buying in doesn't have great schools, moving there may not be a great choice, even if you can swing the nicest home that area has to offer. 

Ultimately, there's no right or wrong answer to whether you should buy the priciest home on a given block or in a given neighborhood. In some cases, doing so could mean buying your dream house, but in others, it could mean getting stuck with an expensive property you can't unload when you want or need to.

Either way, before you make your final decision, talk to a local real estate agent to get a good feel for the neighborhood in question. That way, you'll better understand the risks and benefits involved, which is crucial when you're talking about making what could be the largest purchase of your life.

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