I suspect part of the reason those other homes are so much less is because they are so much older. What are the odds that some of the other, older homes will have a portion of the land sold off (so perhaps another newer, more expensive home will be built?) Are the older homes of the same amount of square footage you are planning? What are the odds that some of those older homes will someday be a 'tear-down' and a new, more expensive home will be built?

Hi new beginning, youhave very good questions and give lots of food for thought. Some of the properties have recently been subdivided. There is a vast array of sq ft of these older homes, some are in awesome condition while some are in disrepair. It really is a mixed bag at this point. Who knows if, in the future, some of the homes will be torn down.

I would be hesitant to build something that is not only far more expensive than the rest of the neighborhood, but also if it would be out of the character of the rest of the homes. People, I think, don't often look at homes in isolation, but judge the entire neighborhood as to whether they want to purchase there.

Whether an older home will be torn down is greatly influenced by the location. In some areas of CA, for example, it is almost a given.

However, on a 2 acre lot, some of that concern is diminished. If you feel that is going to be a trend (2 acre lots subdivided from existing homes, with new builds going up) then you might be okay -- take a look at what the other new builds are like -- maybe just temper your budget a little bit.

How much more in cost are we talking about here? (as compared to the other homes)

IMO, a very bad idea. Future buyers and appraisers will use the neighboring homes as comps. And most buyers looking in your perceived price range do not want to live in a neighborhood surrounded by "lesser" homes.

You may even have trouble securing a construction loan, as the new home has to appraise in order for the lender to move forward.

I was told many years ago by one of the top realtors in my town, that one should never over-build ones house or ones neighborhood. I think that advice is excellent. I live in the cheapest house on my block and one of the cheapest in the neighborhood (whose houses are no longer "cheap" at all, including mine!). No, I will never get the re-sale price my neighbors will, but then I didn't pay as much in the first place.

1. Never think forever. We made that mistake. Our forever home is not. We intend to move in a few years.

2. Are you in Florida? I know a lot of "retirement" areas dont really appreciate like Naples or Miami. Even where I am on the west coast our 2nd home/retirement home area is much slower to appreciate.

3. As others have said, people will discount your home heavily based on whats around it. As will banks and appraisers.

I was once - correctly - told that the appraisers don't care how much you paid for a faucet only that it's a working faucet. Windows are windows and it doesn't matter if they are American or Pella. You can put a lot of money into upgrades that won't give you an extra dime at resale, except, perhaps, make the house more marketable. If this is where you're adding 'value' then you might want to rethink those decisions.

Well it seems to depend a lot on the other factors of land being subdivided and what is being built on those new lots too. Is it a really desirable neighborhood overall as in its location etc. would become something others want as time goes on. We did own a lot and never got around to building on it, but we would have been the most expensive at the time. We hesitated and eventually sold that lot, but now houses there are way bigger and more expensive than what we were originally planning. It is really hard to say.

I've also owned the biggest/most expensive home in a neighborhood, but we got it for a good deal so someone else ate the cost of paying too much at one point and when we went to sell it there were plenty of surrounding areas with larger homes that sold too so we ended up making more on it than we expected when selling.

What I'm trying to say with my long post is that nobody can tell the future. There can be some indications of if it is going to go in one direction or another, but nobody ever knows. Do it if you feel you can afford to loose that money and if not scale back or build somewhere else.

You could be ahead eventually if you are the first to build an 'outlier' (more expensive home) -- IF the area is ripe for expansion. How much appraisal difference are we talking about?

We are on the other side of this equation, having *under-built* for not only the neighborhood, but for the potential of our teardown lot in a mature neighborhood. (We got what *we* wanted in house and location.) Since we built, a scattering of other small ranches came down and were replaced with larger and more expensive houses, while the even larger and historic houses continue to hold their value.

Appraisers use the four stages of neighborhood life to describe what happens with property development:

Growth: A period during which there are gains in public favor and acceptance. Demand increases.

Stability: A period of equilibrium without marked gains or losses. No real obvious change.

Decline: A period of diminishing demand and acceptance.

Renewal: A period of rejuvenation and rebirth of market demand.

This may be a lot in an area with in demand older homes that are experiencing a renewal. The surrounding homes are nice, but not the latest design. If you really love the location, go ahead and build. But, it's going to be lost money. You will over build for the neighborhood cycle.

As an appraiser, if I were appraising the new build, I can at least get you some additional valuation because of the upgraded condition. But, I'm going to have to use one of the neighborhood homes as a comparable due to location. The neighborhood comparables won't reflect your investment. Then, I would have to find similar new custom built homes as close as possible. It's an appraisal nightmare.

Using the neighborhood homes will be required and it may drag your valuation down. Maybe there are some older homes that have been renovated or have new additions in the neighborhood. That would increase the valuation because it would support me being more flexible in my evaluation.

From a financial standpoint, you would be more likely to get your money out of the property if you purchased one of the older homes and renovated. If there are other teardowns and new building in the area, you may be in the middle of a renewal phase. If you are the first, it can be a risky proposition.

Yes, it is very often OK to be the most expensive house on the block. In fact, it is may even be preferable to buy the most expensive house on the block. The aversion to best house around is one of those odd bits of wisdom that is only correct in certain situations.

Having said that, the situation where this most often doesn't apply is when you are building a house.

There is some logic to the idea of the most upgraded/expensive house in an area being "held back" by the other houses in an area. However, there are really three parts to gain, (1) what you paid, (2) what you sold it for, (3) how long you owned it.

So the question of whether or not to buy or build the most expensive house on the neighborhood starts with what you are going to pay for it? If your cost is low enough, then the value will be there regardless of whether or not the appraisal and selling price would be higher somewhere else.

Great advice above but...........you mention that you are building this as your retirement home. When is retirement? Are you planning for universal design/ADA compliant? Flex spaces? Building roughly the same square footage as the neigbourhood or larger house/smaller lot? How much over the norm will your house be? What are the factors keeping the prices of the other houses lower (e.g.,poor local economy or poor school district in area where economy is strong)? So many variables to consider. I think you have to be 'on the ground' to really frame a definitive answer.

Thank you all for each and every one of your comments. Lots of good questions to contemplate. Vacant semi rural lots, within close proximity to centre core a becoming increasingly rare and more expensive. There are some pockets which have skyrocketed whereas others are slower on the rise. Ours is the latter. The house plan would consist of ADA compliance. Building permits and construction costs are skyrocketing. Who knows what this area would be like in years to come, wish crystal balls existed, lol.

I thought you already had a lot and had a house designed for that lot?

Hi CP, yes we have the awesome plans and lot. Just covering all bases.

Is not there any other lot that is out by itself or in a neighborhood that would support your price point?

Hello ncr. Interestingly, there are no lots within the same proximity to the city at the same price point. We looked for 2-3 years prior to purchasing. Lots, if one can be found, are 2-3x the price and in ‘executive or estate ‘ type subs; which have covenants or building regulations etc.

Are you saying there are no building codes where your lot is located? What do you get for your taxes in that location?

Hi chisue, I apologize if I mistated, absolutely there are stringent building codes. Taxes are high approximately 1% of property value. Included in our taxes are hospitals, schools, roads on and on No bus service, nor water or sewer. Hence well and sceptic which add to the costs.