Posted July 5, 2010 by Bonnie Burgett

Money Magazine’s tip #5 – “Let the Joneses be Your Guide”

My dad always says that you want to be the smallest house on the block…. While there may be reasons to disagree with my dad, one thing that I don’t disagree with is that you don’t want to be the biggest or have more upgrades to your home than the neighborhood market can support in terms of returns. 

We have a family friend that has been remodeling his home on his own as a “hobby” for 7 years – yes, 7 years – which means his wife is not only a SAINT for putting up with it, but it means he has put a lot into making his house the Taj Mahal of the neighborhood.  You name and it he’s got it built into the plan.  With a career in construction he has done a lot of the work himself or closely monitored contractors making it one heck of a well done remodel.  However, a few months ago he decided to make a big push to finish and needed some funds (aka a refinance) to finish BUT he faced a problem – the appraisal.  There were no comps to support the value.  In a market with tight financing terms and stricter lending requirements than years past this presented a huge problem.

Furthermore, let’s face it; no one is going to buy a house of this caliber (read: high price tag) in this neighborhood.  I’m not saying the neighborhood’s bad but people looking for a $1 Million house aren’t going to be looking in a neighborhood of $300,000 homes…. So it’s a tough sell to buyers and to the bank. 

While some neighborhoods turn over and become hot spots for re-developers, other neighborhoods just don’t or won’t for a while.  Being the first to build or upgrade to a $1 Million home in a lower priced neighborhood should be left to those spec builders that want to take that risk – you, as a home owner, have smarter ways to spend your money. 

With all of that being said, you may sit back and argue that he gets his dream home in his dream location… true.  He’ll enjoy living there but most people don’t have the luxury of being able to ignore the fact that your home is your largest asset.  I personally think the biggest mistake buyers make is being too emotional about a home.  Sure you want to make the right decision and something that you will be happy with for years, but don’t let your emotions allow you make a bad business decision with your largest asset.  The current market state and flood of foreclosures are stark reminders of this fact.

Source: Garskof , Josh. “Six Ways to Ensure a Project Pays Off.” Money January/February 2010: 58-59.

Please contact me if you have any questions about this blog, any of my previous blogs or are interested in buying, selling or renting a new home!  Bonnie@RogersHealy.com or 214-794-0306 

Hope to hear from you soon!  Cheers, Bonnie