A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to wealthy investors and consumers. Sign up to receive future issues straight to your inbox.
The wealthy have taken “silent wealth” to a fresh level, experts say, turning to private purchases of mansions, art and classic cars aimed at avoiding attention.
Auction companies and luxury real estate agents say wealthy buyers and sellers are increasingly turning to private sales and off-market listings to avoid social media and prying eyes. While public auction sales are dwindling in the art world, private sales – made behind closed doors between prudent buyers and sellers – are rising.
Last year, while combined sales at Sotheby’s, Christie’s and Phillips public auctions fell 19%, private sales rose 4% at Sotheby’s and 5% at Christie’s, totaling $2.4 billion at both auction houses. She informed CNBC in February that Christie’s sold a Mark Rothko painting for more than $100 million to hedge fund billionaire Ken Griffin, even as public auctions continued to decline.
Classic cars are also moving towards private sales, especially the most high-priced and sporadic models. RM Sotheby’s, a classic car auction company, has been selling Ferrari, Porsche and other trophy cars at public auctions for over 30 years. However, according to Shelby Myers, global head of private sales for RM Sotheby’s, RM Sotheby’s newly established private sales division has seen sales more than quadruple in the last four years.
Private sales, in which buyers and sellers broker the sale of cars discreetly without an auction or public price, now account for almost a third of revenues, he added.
“We’ve definitely seen a trend where people want to transact privately,” Myers said. “Discretion is key today. People can buy without the whole world staring at them.”
The growth in private sales of classic cars, art, real estate and other markets is fueled by social media, technology and low prices for collectibles. When a piece of art or a classic car goes to auction, the results, and sometimes the seller, are very public and spread on social media and blogs.
Collectibles experts say sellers don’t want to risk putting a valuable item up for auction only to have it stumble upon publicly.
“Now when someone loses money on a sale, it’s very public, and no one wants that,” Myers said. “Just a few years ago, you could buy a car at auction and prices weren’t spread around social media.”
Collectors who like to show their cars at events and awards shows also avoid auctions because viewers can more easily find out how much the owner paid.
“Car enthusiasts used to be a relatively petite, tight-knit group,” Myers said. “Now, when a massive collector shows his car, the news spreads like wildfire on blogs and the Internet. And everyone can see who owns it and how much they paid.”
In the real estate industry, many of the largest deals in Manhattan, Malibu, Aspen, the Hamptons and Palm Beach are currently in private or “off-market” sales. Off-market properties, also known as “whisper” or “pocket” deals, are not listed on many listing services or public websites, but are quietly purchased among a select group of brokers and buyers.
A townhouse in Manhattan’s Greenwich Village sold this year in an off-market deal for $72.5 million, making it the most high-priced townhouse ever sold downtown. A 13,000-square-foot Palm Beach mansion sold off-market for $60 million, making it one of the most high-priced non-waterfront homes ever sold on the island. By contrast, Aspen’s first sale for more than $100 million – Patrick Dovigi’s Red Mountain mansion to billionaires Steve Wynn and Thomas Peterffy – took place off-market, with a broker representing both the buyer and seller.
Los Angeles is considered the birthplace of off-market listings, dating back to the 1980s and 1990s, when celebrities and movie stars wanted to avoid overzealous fans visiting their historic-listed homes.
Over time, according to Douglas Elliman real estate agent Ernie Carswell of Los Angeles, not only wealthy but also eminent sellers joined the off-market craze.
“Even the average multimillionaire or billionaire likes the idea of selling without media and invading privacy,” Carswell said.
Carswell said he currently has a billionaire client in Modern York who wants a unique property in Los Angeles, so Carswell is considering a mega-mansion owned by a Middle Eastern billionaire who is only offering it to select buyers. He’s also working on a deal in Palm Springs with a celebrity who’s selling a house he didn’t want to be publicly shown to a billionaire buyer who doesn’t want any photos of his fresh home on the Internet.
“They don’t want burglars to know how to get into the bedroom, how much dirt there is and how to get through the hedges,” Carswell said. “I blame technology.”
Carswell said off-market listings don’t make sense for properties valued under $5 million because they have a larger possible pool of buyers and benefit from broader marketing. However, in the case of special mega-homes in Malibu, Bel Air or Beverly Hills, priced above $20 million, the list of potential buyers is smaller and most of them are already known to brokers, which increases the attractiveness of an off-market deal.
That makes relationships with brokers even more critical – especially for the wealthy, Carswell said.
“Never before has the need for a qualified real estate professional, especially at the highest level, been more valuable,” he said.
Still, some brokers say that even for high-priced properties, private sellers don’t get the highest price because they limit the pool of potential buyers.
“They’re leaving money on the table,” said real estate broker Noble Black of Douglas Elliman. “There is a valid reason for not listing, you want privacy and discretion. But you pay a higher price for it.”
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