The Trump Card
By Charlie Elliott, MAI, SRA

If you are a first-time homebuyer, or if you are a seasoned pro at the fine art of selecting the largest investment most of us will ever make, it’s never too late to re-examine the criteria for making that selection.

Once I bought a home, Home A. I held it for five years, and it doubled in value. That was a wise decision. Furthermore, I bought another home, Home B. I saw it as a good deal. I held this house for 10 years, and actually lost a few dollars on it. That was a not-so-wise decision. I now know why; more about why later.

In addition to being a place to live, our home should be a source of wealth. There are many senior citizens out there who have secured their retirement by making good home-buying decisions. Some bought homes for $20,000 and $30,000, when they were young, and sold them, in their later years, for hundreds of thousands of dollars. I suggest to you that this is better performance than that of many 401k accounts. Also, these profits are usually sheltered from income tax. That means we eliminate Uncle Sam as a silent partner. I like that part especially well.

What is the single-most-important feature to look for when purchasing a home? The sophisticated buyer will consider many qualities in a home, prior to purchasing it. These may include age, size, condition, price, décor and location. All are important. It is, however, not insignificant to point out that buying a home is like playing a game of poker. There is one card that trumps all of the others. Location is the ace of the poker hand. Yes, you need all of the other cards to play the game, but location is the ace.

Getting back to my previous investments, Home A, the one that doubled in value in five years was in a superior location. Home B, the one I lost money on after 10 years, was in a not-so-good location. I realize that today, but I did not at the time. I could have bought a similar home in a superior neighborhood, but the homes there were more expensive. Those homes appreciated; mine did not. The better deal was the more expensive house. When prices are cheap there is a reason and, it is usually the location.

For a bit of intellectual stimulation, why should so much emphasis be placed upon location? After all, I cannot use a home with carpet in the bathrooms or red bedrooms. The answer is simple. Out of all of the features listed above, location is the only on that cannot be changed. That makes it the trump card.

Is the property in the path of growth? Are home values increasing in the neighborhood? Is the home close to, country clubs, schools and employment? Is it close to Wal-Mart and Target? If these questions can be answered in the affirmative, that’s good. Selecting a good location is not an exact science. Your Realtor should be a good resource here, as he or she will have insight, which you may not likely have.

You may have heard that buying a house is like getting a massage; finding the right spot is critical. Another commonality that I might add is that it also feels good when properly executed.

Yes, pay attention to details such as a garden tubs, granite counter tops, the color of the carpet and the cabinets. It is important to remember, however, that these things can be and probably will be changed over time. The location cannot be changed, however, and it represents the trump card in the game of home buying. Focusing on the location will separate the financially successful home buyer from the not so successful.

Charlie W. Elliott Jr., MAI, SRA, is President of ELLIOTT® & Company Appraisers, a national real estate appraisal company. He can be reached at (800) 854-5889 or charlie@elliottco.com or through the company’s Web site at www.appraisalsanywhere.com.