Is it the way to go?
What is selling by stealth? It is when you sell your property without any marketing or open inspections other than selected buyers being handpicked and introduced by an agent. The first your neighbours know of your intention to sell is when you tell them it is sold. However, is it the best way to sell your property for the maximum price? The answer is “it depends”.
It depends on the circumstances and context of the sale. Stealth selling is not a recommended universal selling strategy for all properties. But when the scenario arises to do so, the results can be fantastic. Going to the open market is most often the best strategy for the majority of properties. Indeed, to sell a property with broad market appeal in buoyant market conditions by stealth would be a mistake.
Fergus Nutt from Warlimont & Nutt P/L said there had been numerous instances in 2010 where the sale price exceeded both the agent’s and the seller’s expectations. If any of those sales had been conducted without full market exposure, there was a great risk of underselling.
“Interestingly enough, underselling is most common in a strong market. The difference between a good price and a great price can be overlooked in the excitement of selling.” Fergus said.
Three Scenarios
Stealth selling works best in 3 scenarios. The first being the property has previously undergone a marketing/auction campaign that has failed to produce the desired result. A property that is left languishing on the market is a poor look. Buyers begin to ask that dreaded question, “What is wrong with it?” In this situation, withdrawing the property and getting an agent to handpick buyers is quite often the best way to go. It protects the value of the property and avoids it being turned into a lemon.
The second scenario where stealth selling can deliver a great result is when the agent has a buyer that really needs and wants to buy, but has been unable to find anything suitable. They may have sold their property and are working towards a deadline, they may be time poor and frustrated after missing out on a number of properties or have a unique criteria of what they desire in a property. In a lot of cases, the agent will get a sense of whether these buyers are prepared to pay the right price to secure the right property. To finalise the property search, the buyer will quite often pay a premium market price.
Fergus pointed out, “If you have the right property for a highly motivated buyer, you are quite likely to receive a premium price without the need to go on the open market.”
“Warlimont & Nutt recently sold three properties in Two Bays Crescent, Mount Martha for prices between $1.42m and $3.38m, with only two buyers having inspected each home. The success for the owners was not about the prospects that inspected the homes before a sale was achieved. It was a success in that non-buyers did not inspect the home. The owners were not interested in multiple non-buyers and lookers passing comment on their family residences of up to 40 years. We were under strict instructions to only show qualified and financially capable buyers.”
In other examples, Warlimont & Nutt has assisted in the sale of a further 5 acres to the successful Balcombe Grammar School in late 2010 without even going on the market. The transaction was simply concluded between two neighbours. A campaign offering the property to the open market was unlikely to have resulted in a superior result.
Thirdly, sellers of unique properties can be well advised to sell by stealth. Why? Unique properties often appeal to unique buyers. Unique as in the features they require in a property. Unique is a greatly misunderstood word in real estate. Unique is neither positive nor negative, it is neutral. Unique does not mean the property is worth more or less, it is a rare kind. Many have made the mistake of equating unique into priceless.
Indeed, the more buyers that inspect a unique property and don’t buy it, the more pressure increases on the owner to revise their price expectations.
Commercial properties are a great example of unique. This is why commercial properties can take longer than residential properties to sell and/or lease when they go on the market. Often, the property can be priced right but have no takers. The right buyer, one who would see value in the unique features of the property may not be active in the market. A concentrated expensive marketing campaign may well promote the property to a lot of non-prospects. It is a simple matter of waiting for the right prospect to enter the market.
The same principles can apply with unique residential properties. Selling by stealth can alleviate the pressure on owners as they attempt to establish the right buyer at the right price.
The right buyer
Many people who are interested in selling hold off due to the process of selling rather than the act of selling. If there were a buyer ready to go, they are more than happy to sell. The thought of risking advertising money, stress, time and the energy of monitoring a campaign forces the sale onto the back burner.
Fergus advises such clients to get a Section 32 Vendor Statement prepared for their property by their solicitor in case he or any of his team members come across the right buyer. The property is unofficially on the market but a “would sell for the right price...” proposition. 49 Legacy Drive, Mount Martha sold for $1million in 2010 without ever going on the open market. It was only ever promoted as a silent listing.
“Even though there was no effort on behalf of the seller, the buyer was keen to secure a property. The relaxed attitude towards selling left the seller holding the Aces.”
Fergus Nutt
& Peter O’Malley