Houses go underwater when markets drop. Remodels get out of hand, chewing up equity. The value of the nicest house in any given neighborhood typically regresses to the mean. Real estate is risky business, even when cautiously and reasonably approached.
Why though, would one choose, upfront, to finance the building of a house that will cost more than its estimated market worth? Is the dream of such a house justifiable? Will fulfillment of that dream make one happy, or even happier? Is happiness even part of a rational equation?
Most custom houses just boldly go. The expectation is for the beautifully finished abode to be worth (at least) every penny -- every detail, an investment.
Project into some alternate future: You, selling. Neither real estate agent nor assessor acknowledge your valuation of said fabulous home. Are they blind? See here! You protest, offering thick files, delineating all the many tweaks and overhauls, all the loving care. Fond memories and affection are beyond official scope, but from where you stand, top market price is a starting point.
The Endowment Effect dictates that we value what we have more than others do.
Such a simple concept, and it buggers us all.
Project again: Would you be willing to pay the righteously ambitious asking price (for your beloved house) if you were the buyer?
Well, let's say yes. Done deal! Now, how long will your acquisition high last? Six months from buy-in, will gazing up at the warm, wood ceilings still spark an inner glow? Will those soapstone countertops (with integrated sinks!) brighten every trip into the (awesome) kitchen? Will waking up in the private shelter of redwoods (tucked away from sound or sight of neighbors) invite you deeply into presence and gratitude?
Alrighty then! I hear you.
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