Have you heard the old saw, You don't want to own the most expensive home in the neighborhood? Well, there is a lot of truth to this. When you go to sell this home all the comps will be lower priced, from smaller, less desirable homes. All these conditions will need to be adjusted for by the appraiser, and more importantly, the potential buyer.
What value do you place on the third fireplace? How about the 6th bedroom? Or, what about the fact that the home sits up on a hill overlooking the rest of the neighborhood? All of these characteristics have a value, both positive and negative. Up on a hill you say? Well, enjoy the walk every day up and down that steep driveway to get the paper or mail.
You can also over build a home. Let's say 15 years ago you bought an average sized home in your neighborhood. You then finished the basement...using imported tiles from Italy, hardwoods from Brazil, and a cool light fixture from somewhere in Europe. Then you went on to tear out the kitchen and put new everything back in. You have a great home now right? Who wouldn't give you all that money back when you sell?
The truth is, improvements to a home almost never get 100% of the cost back at sale. So when you are eying the next great thing for your home, make sure it is something you will enjoy, not just something to pump up the value of your home.