When you’re looking to buy a home, you have many options. If you’re looking at a new construction home rather than a pre-existing one, you’ll be given an entire list of options, much like buying a new car. Many of these upgrades offered by builders are places for them to maximize their profits. By positioning themselves as a “one stop shop” they can make the process as simple as checking boxes with dollar signs next to them. The simplicity of saying ‘I’d like quartz counter tops, this tile flooring, these cabinets, etc’ can be alluring, but you’re trading your time for top-dollar prices on materials & labor.
How many smaller items do you purchase without shopping around? If you’re furnishing your home do you walk into a store & “say I need a couch”, take what ever they bring out to your car & pay what ever they’re asking? If you do, stop reading, I can’t help you. These upgrades, while much smaller in price than say a car, or a home itself, can add up very quickly. Perhaps you could assess the upgrades offered & select the ones most important to you, then buy the new home from a builder, and get multiple bids from quality contractors that can even do a better job, with better products, for less money. Doing this means you’ve added value to your home for less expense thereby creating net worth for yourself when it comes time to sell or refinance.
Now one more thing to keep in mind, is the idea of diminishing returns. Meaning what you pay for a luxury in some cases increases the overall objective value of the home (what an appraiser says it’s worth) beyond what you paid for them. Many, however will not. If you have a list of upgrades you liked from the builder, and you’re going to hire an appraiser to value the home for you, you may be able to ask the appraiser to review the upgrades you’re looking at doing and ask him if the cost of upgrading will result in getting your money back when you sell, result in loosing money when you sell, or result in just covering the cost of upgrades yet the cost is worth it for your quality of life while living in the home.
Remember if used properly a home purchase can be not only a move that provides an ideal space for living, but can create value when it comes to your net worth. One of the larger potential upgrades in Nevada, is the option for a pool. According to HouseLogic.com, a pool may be a good investment if it won’t add more than 10-15% of the cost of the home without it. This cost needs to be weighed against how much your family will really use it. Will you get enough enjoyment out of it that the cost of both purchasing, maintaining, and in most cases the cost of financing it make sense? Another thing to consider, which ties back into the 10%-15% of the home cost is that many families buying homes under $300,000.00 may not want the yearly expenses of cleaning and maintaining a pool & might opt for the home for sale next to yours because it’s in a nice neighborhood & they can just afford to live there but not afford maintaining a pool. If you’re in a neighborhood where many homes have pools, and cost over $350,000.00, your family will use the pool weekly & it provides quality of life your willing to pay for, maybe it makes sense.
Speaking of the value of homes near yours in new construction subdivisions here’s the biggest thing to consider: Where does your home line up in the overall price of homes in the neighborhood? Markets will always swing up and down through the years. One thing that will always stay consistent however, especially in an area with an HOA, is how your home compares to other homes in the neighborhood.
Let me explain. Let’s say you’ve spoken with your mortgage lender and been safely pre-approved for a $400,000.00 home. Great! You’re excited, you want to drive around to the different home sites & start looking at models. What should you be considering before worrying about the specific home you want, much less the upgrades? The homes around it. That $400,000.00 you qualified for can buy you the nicest home in the neighborhood if homes there range from $250,000.00 to $400,000.00. It can also buy you the smallest, or least upgraded home in a neighborhood where home prices range from $400,000.00 to $650,000.00.
What’s the thing to consider here? That both homes, in both neighborhoods may be very similar. What your getting with the least expensive home in a more expensive community is increased desirability when it comes time to sell, statistically speaking that time will come, so set your self up to make money. Being around all those really nice homes you can’t afford, will make your $400,000.00 home more desirable to a prospective buyer than being the ‘nicest home’ in a less desirable community. In a much exaggerated example, think of some peoples reaction to your address: “wow, you live in Spanish Trail?” versus “oh, you’re in Rhodes Ranch, ok”. (no, I’m not currently aware of a $400,000.00 foreclosure in Spanish trail, that’s to illustrate a point) Why are these two reactions so different? Because of the surrounding neighborhood. Maybe when it’s time to sell; being a part of that prestigious community is what your prospective buyer is really after. To him/her location is more important than the home itself.
So at the end of the day, remember:
- Buy as much house as you want to, that you can safely afford. Just do it where everything else around you is more expensive.
- Don’t get up-sold on overpriced upgrades, you can always do those later & probably for less money. What you can’t do is change where the home you bought is located.
- If you’re looking to buy or sell a home in Las Vegas call me. Steve Christmas 702-879-8502