3 Reasons Not to Buy the Best House in the Neighborhood

Don't make a home buying mistake you'll come to regret later.

When you buy a home, you naturally want the best house that you can afford to purchase. But, you need to be careful. One key thing you do not want to do is purchase a home that is more expensive and of better quality than the properties surrounding it.

Buying the best house in a neighborhood might seem attractive, but there are three big downsides that make this decision the wrong approach when purchasing a property.

1. Your property values won't appreciate as fast

If your home is the best in the neighborhood, you can expect its value to go up much more slowly. That's because most of the homes in a given area are usually of comparable value and quality -- and there's a limit to how much extra people will pay for a property in a neighborhood that is full of lower-priced competitors.

Purchasing the best house in the neighborhood also means that any upgrades you do typically will not increase the home's value much, if at all. That's because the price of the over-improved home is probably already maxed out. By contrast, if you buy the worst home in a neighborhood, those improvements can have a dramatic positive impact on what the house is worth since you'll be bringing it more up-to-par with its peers.

2. It could be harder to find a buyer in the future

Most people don't want to live in a home that is much nicer than those surrounding it. As a result, it could be difficult for you to find people who are willing to look at the property or who are willing to pay the desired price for it.

It may also be harder for both you and the next buyer to get the house to appraise for enough to cover the purchase price -- which can pose a problem when you try to qualify for a mortgage. The types of upgrades that may make the house seem the best -- like an addition or a new kitchen or a pool -- simply may not be worth enough to raise the home's value in an area where the neighborhood is not that great.

3. You can't assume the neighborhood will improve around you

Finally, you may think that it is not a big deal to buy the best house in the neighborhood because you might assume the area is on the upswing and surrounding properties will be improved over time as well.

This can sometimes make sense if there is solid evidence that a shift is taking place and people are buying and fixing up the homes around the one you buy, but this is a huge gamble. There's no guarantee that other properties will continue to be improved so the one that you're thinking about purchasing will fit in better.

Ultimately, you may not want to take this risk. If you want to make the safest investment, it's a good idea to buy a house in a nice neighborhood that either fits in with surrounding properties or that is the worst house that you can then work on improving over time.