A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for wealthy investors and consumers. Sign up to receive future issues straight to your inbox.
The rich have taken “quiet wealth” to new levels, turning to private purchases of mansions, art and classic cars to avoid attention, experts say.
Auction companies and luxury real estate agents report that wealthy buyers and sellers are increasingly turning to private sales and off-market listings to avoid social media and prying eyes. While public auctions are declining in the art world, private sales – which take place behind closed doors between discreet buyers and sellers – are increasing.
Last year, while combined public auction sales at Sotheby’s, Christie’s and Phillips fell 19%, private sales rose 4% at Sotheby’s and 5% at Christie’s, totaling $2.4 billion at both auction houses. CNBC reported in February that Christie’s had sold a painting by Mark Rothko to hedge fund billionaire Ken Griffin for more than $100 million, even as the number of public auctions continued to decline.
There is also a shift towards private sales for classic cars, particularly the most expensive and rare models. RM Sotheby’s, the classic car auction house, has been selling Ferraris, Porsches and other trophy cars at public auctions for more than 30 years. According to Shelby Myers, global head of private sales at RM Sotheby’s, sales at RM Sotheby’s newly formed private sales division have more than quadrupled in the last four years.
Private sales, in which cars are discreetly brokered between buyer and seller without an auction or public price, now account for nearly a third of sales, he said.
“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 rise in private sales of classic cars, art, real estate and other markets is being driven by social media, technology and falling prices for collectibles. When a piece of art or a classic car is auctioned, the results, and sometimes the seller, are very public and spread across social media and blogs.
Collectibles experts say sellers don’t want to take the risk of putting a valuable item up for auction only to have it end up publicly auctioned.
“It’s become very public when someone loses money on a sale, and no one wants that,” Myers said. “Until a few years ago, you could buy a car at auction without the prices being shared on social media.”
Collectors who like to show their cars at events and award ceremonies also shy away from auctions because viewers are then more likely to understand how much the owner paid.
“Car enthusiasts used to be a relatively small, tight-knit group,” Myers said. “Now when a big collector shows his car, it spreads like wildfire across blogs and the Internet. And everyone can see who the owner is and what they paid.”
In real estate, many of the largest deals in Manhattan, Malibu, Aspen, the Hamptons and Palm Beach are now being sold privately or “over-the-counter.” Off-market properties, also known as “whisper” or “pocket” offers, are not listed on multiple listing services or public websites, but are quietly offered by a select group of agents and buyers.
A townhouse in Manhattan’s Greenwich Village sold for $72.5 million in an off-market deal this year, making it the most expensive townhouse ever sold downtown. A 13,000-square-foot Palm Beach mansion sold off-market for $60 million, making it one of the most expensive off-water homes ever sold on the island. And Aspen’s first $100 million-plus sale — Patrick Dovigi’s Red Mountain mansion to billionaires Steve Wynn and Thomas Peterffy — was off-market, with the broker representing both the buyer and seller.
Los Angeles is considered the birthplace of off-market deals, starting in the 1980s and 1990s when celebrities and movie stars wanted to avoid overzealous fans visiting their landmark homes.
Over time, wealthy but not famous sellers have joined the off-market trend, according to real estate agent Ernie Carswell of Douglas Elliman in Los Angeles.
“Even the average multimillionaire or billionaire likes the idea of selling without media and privacy violations,” Carswell said.
Carswell said he currently has a billionaire client in New York who wants a special property in Los Angeles. Carswell is therefore looking for 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 selling a home he didn’t want to show publicly to a billionaire buyer who doesn’t want photos of his new home on the Internet.
“You don’t want burglars knowing how to get into the bedroom, how much land is there or how to get through the hedges,” Carswell said. “I blame technology.”
Carswell said off-market listings don’t make sense for properties under $5 million because they have a larger potential buyer pool and benefit from broader marketing. But for special mega-homes in Malibu, Bel Air or Beverly Hills priced above $20 million, the list of potential buyers is smaller and most are already known to agents, making an off-market deal more attractive.
That makes brokerage relationships even more important — especially for the wealthy, Carswell said.
“Never before has the need for a qualified, connected real estate professional been more valuable, especially at the high end,” he said.
Still, some agents say that even with expensive properties, sellers who trade privately don’t get the highest price because they limit their pool of potential buyers.
“You’re leaving money on the table,” said real estate agent Noble Black of Douglas Elliman. “There is a valid reason for not being listed, you want privacy and discretion. But you pay a premium for that.”
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2024-05-17 14:27:55
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