Tips for Selling a White Elephant House
One of the worst homes I've ever owned in the 1980s was a white elephant house. The sale happened so fast due to owner financing that I didn't have time to blink much less consider the ramifications of my actions. We closed in seven days. The home I had purchased featured an indoor pool and measured 8,600 square feet, nestled at the foothills of North Tustin, CA. The main problem was the surrounding homes in the neighborhood were about 3,500 square feet.
This home was an odd duck.
When it came time to sell a few years later, it became clear to me why this home was hard to sell. Home buyers want to buy homes in neighborhoods where all of the other homes are like the home they are buying. If a buyer wanted to buy a home as big as 8,600 square feet, they want the other homes nearby to be the same size. I finally found a bigger fool and sold the home to that person. But that was almost like looking for a needle in the haystack. I was just lucky.
Most people are very unlucky when it comes time to sell a white elephant house. The problem is buyers seek conformity. That desire is embedded in nature. It is comfortable to be surrounded by things that are familiar and unified. It's why people prefer to buy a home in the middle of the block, for example, than a corner home. They view corner homes as riskier, more exposed, different from those in between the corners.
Buyers tend to pass by over-improved homes that don't resemble all of the others around it.
If all of the homes in a neighborhood are typically 2,000 square feet, for example, and your home is 4,000, it may take a while to sell it. That's because buyers who purchase 4,000 square foot homes want to buy that size of home in a neighborhood of other 4,000 square foot homes.
They want to live next to other people just like themselves. They are people who would not live in a 2,000 square foot home. They don't want to buy the best house on the block, either. Quite the contrary, money is made by buying the worse house on the block and improving that house to conform with the others.
It would make these sorts of people very uncomfortable to live in an area where their home is enormous as compared to the other homes around it.
When I find myself in a situation when I have to sell a white elephant house, the first thing I do is ask the sellers why they bought the house in the first place. What specifically attracted them to this specific house? That answer is what I draw upon to find people like that. It's what I focus on to market the home, so I can attract buyers who want the same thing.
Second, I look for market conditions that make the white elephant house appear desirable. For example, if the market conditions present a seller's market, it's perfect. Because that's the best type of market in which to sell a white elephant house. In seller's markets, homes typically sell very quickly and there is a limited inventory of supply. If that white elephant house ends up being the only home for sale in the neighborhood, that's good news for the seller of that house.
It means a buyer may not notice any of the surrounding homes nor use them for comparison.
In seller's markets, buyers are often feeling pressured to find a home, and there is a lot of competition. Often those market conditions result in multiple offers. Multiple offers feed off desire, and when that white elephant is the only home available for sale, it can draw a lot of attention it would not otherwise draw in a slower, non-competitive buyer's market.
A third tip is to market to buyers in another city who tend to choose your city for relocation. A community such as the city of Riverside in Southern California might draw buyers from Los Angeles. Buyers who are relocating from an expensive area into a less expensive area might find the lower sales prices so enticing that they will pay cash. If they pay cash, there is no appraisal.
If there is no appraisal, it lessens the chances an appraiser will issue a low appraisal based on lower sales prices for smaller homes.
And last, of course, there is always the opportunity, if a seller should so choose, to sell that white elephant simply for a lower price, more in line with the other homes in the area. For some sellers, that would mean taking a loss on the sale.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.