Ask Paul: I paid too much for a house I don't even like


Dear Paul,

In early 2021, my partner and I bought a home for $850,000, despite the valuation coming in at $790,000. We needed a place as soon as possible, as we had moved interstate and had a baby in tow

Sleep-deprived and overwhelmed by all of the change in our lives, we put in an offer well over the asking price. 

ask paul clitheroe i paid too much for a house i hate

We have come to find the home doesn't suit us and is somewhat of a money pit, with major work required in the garden, on the house layout and fencing. It's money we simply don't have and, even if we did, it would just never add value. 

So, my question is, how many years must we stay here before we can sell and buy something that suits us better and enable us to make our money back (stamp duty plus agent fees plus a bit of profit to help with the next purchase), or are we stuck here for life? Yikes! - Penelope

Yikes indeed, Penelope! Getting a valuation below your purchase price is not terribly uncommon.

Valuations done by a bank are, quite sensibly, very conservative. But I am quite concerned about your comments that fixing the fence, garden and house layout would not add value - these are usually pretty effective at increasing a home's value.

But this is all very academic if these improvements would require money that you do not have.

Instead, let's look at our natural human instinct to "never sell at a loss".

You think, in a haze due to sleep deprivation and an interstate move, you have overpaid a bought a house that does not suit you. Let's say that this is true. Your current home obviously needs work, but this work is unlikely to improve its value. Maybe it isn't in the best location, either.

Anyway, if we assume, realistically, that over time any reasonably located property will go up in value, by the time your current home does this, surely we have to assume other "better" properties will increase in value more rapidly than yours?

My point, Penelope, is that this may be one of those times in life when you take a deep sigh and sell at the price the market is willing to pay, cut your losses and move to a more suitable property.

Painful, but we all make errors when it comes to money, homes and investment. It doesn't sound as if you are enjoying your current home, so maybe it is better to just move on.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
Mandy Higgins
July 12, 2023 8.17pm

Ummm, this may be way out of line given the current housing crisis...but shouldn't another option be to rent out this fairly decent property and let it pay for itself given rents are at an all time high with a tight market to boot?

Depending on what options there are for the author - whether it be to move in with extended family (and getting a little extra help with easing the sleep deprivation on the side) or find something smaller in the area which is easier to manage, options exist that aren't just staying put and being miserable or selling at a loss. People I know looking to rent don't care about an overgrown garden or the Feng Shui of a home layout, they'd be just happy for a decent roof over their heads.

Shane L
July 13, 2023 10.44am

First time I've seen someone suggest a homeowner convert a PPOR to IP to *improve* the housing crisis...

Mandy Higgins
July 14, 2023 2.35pm

Like you said it was a suggestion... and for the author to improve her circumstances not a national issue... which would be a pretty hefty burden for a young family wouldn't you say?