When less is (worth) more

REThink Real Estate

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Apr. 15, 2010

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REThink Real Estate

Tara-Nicholle Nelson
Inman News

Q: This may be more of an observation than a question. We just got into contract to buy a home. There was a very wide variety of homes in our price range. We saw some that were twice as big, with great views, but in an older neighborhood farther away for our work commute compared to the place we ended up liking. We saw places that were obviously too small, too.

The place we ended up with just felt really good to us -- it was in move-in condition, had very favorable termite and other inspection reports on file, and was located in a place where we feel like we can get to parks and walk to coffee shops and the market. We have an infant, and might want one more child, so we bought a place that has enough room for the family we see for ourselves in the future.

Many people we know thought we were crazy for not buying a much bigger house on the hill, but we did what we felt was right. What's your take on whether it makes sense to buy as big a house as possible, for resale value?

A: My first thought is that if the peanut gallery is willing to front your downpayment and pay your mortgage and property taxes on an ongoing basis then, by all means, their input should be considered with great reverence and deference.

Otherwise, not so much.

In fact, even when my clients are getting gifts from loved ones to help with their homebuying, I still caution and coach them to (a) make their own decisions independently, as they are going to have to live in that home every day for who knows how long, and they need to be as happy as possible with it, and (b) avoid buying to resell.

Now, there are certain things that I have encouraged fence-sitting clients to eschew in favor of a more resellable home in the past, like one-bedroom anything (tough to sell if you're not in the most urban of areas, as even most single people would like a guest room or office), Unabomber-cabin-sized aeries (again, there's a certain minimum level of space below which makes it very tough to sell), and houseboats (hard to finance, plus -- well, need I say more?).

But those are folks who are struggling to choose between one more traditional home and a very off-the-grid home for which there will be a minuscule resale market. And they're also folks who know they'll want to move before too many years pass, and who will need to recoup top dollar for their homes when they resell, in order to make the next move.

If you're talking about the difference between a pristine, family-sized home with a high degree of walkability and commutability, compared to a sprawling Ponderosa or McMansion way off the beaten path, I think that those square-footage-obsessed friends of yours might actually be wrong in thinking that bigger is necessarily worth more on resale.

Fact is, these days, many families would rather not pay to heat, cool, maintain and cover taxes on square feet they don't even use.

Similarly, many would rather be within walking distance of the spots they frequent (even if they don't plan to walk it!) versus a long drive from anything, no matter how nice the views. These trends are just now beginning -- buyers' preference for smaller, easier-to-maintain homes that are well-located vis-à-vis amenities and work is ramping up and doesn't look ready to slow down anytime soon.

When it comes to home, everyone's priorities and space needs are different. I've known families like yours that felt a need to have an in-law unit or a place for the au pair, and I've known families totally comfortable with kids doubling (or even tripling) up in their bedrooms.

If you're not at all on the fence, and you have clarity that this home simply feels "right-sized" for your family (and right-located, too), don't make your decision solely based on resale value. You'll be living there, so you need to be happy with it.

And, it sounds like you plan to be there for some years to come; enjoy your new baby in your new home, rather than spending your time "fixer-upping" or driving to get to where you need to be. Good luck!

(On a side note, you might want to pay the inspectors to come back out and walk you through your findings. It tends to be a very low-cost way to ensure that they owe you the legal duties of a client, while also getting to know your new house better than you could do from reading a report.)

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.

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