A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.
The rich have taken “quiet wealth” to a new level, turning to private purchases of mansions, art and classic cars designed to avoid attention, according to experts.
Auction companies and luxury real estate brokers 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 declining in the art world, private sales — done behind closed doors between discreet buyers and sellers — are growing.
Last year, while combined public auction sales for Sotheby’s, Christie’s and Phillips fell by 19%, private sales increased by 4% at Sotheby’s and 5% at Christie’s, totaling $2.4 billion across the two auction houses. CNBC reported in February that Christie’s had sold a Mark Rothko painting for over $100 million to hedge-fund billionaire Ken Griffin, even as public auctions continued to decline.
Classic cars are also seeing a shift to private sales, especially with the most expensive and rare models. RM Sotheby’s, the classic-car auction company, has sold trophy Ferraris, Porsches and other trophy cars by public auction for more than 30 years. But its newly formed RM Sotheby’s private sales division has seen its sales more than quadruple over the past four years, according to Shelby Myers, global head of private sales for RM Sotheby’s.
Private sales, where cars are discreetly brokered between buyer and seller without an auction or public price, now account for nearly a third of revenue, he said.
“We’ve definitely seen a trend where people want to transact privately,” Myers said. “Discretion today is key. People can buy without the whole world staring at them.”
The rise in private sales for classic cars, art, real estate and other markets is being driven by social media, technology and cooling prices for collectibles. When a work of art or classic car comes up for auction, the results, and sometimes the seller, are highly public, spread over social media and blogs.
Collectibles experts say sellers don’t want to risk putting a treasured item up for auction only to have it stumble publicly on the auction block.
“It’s very public now when someone loses money on a sale, and no one wants that,” Myers said. “Up until a few years ago, you could buy a car at auction and the prices wouldn’t be splattered all over social media.”
Collectors who like to show their cars at events and award shows are also shying away from auctions since viewers are more likely to be able to figure out how much the owner paid.
“The car enthusiasts used to be a relatively small, tight-knit group,” Myers said. “Now when a major collector shows their car, it spreads like wildfire over blogs and the internet. And everyone can see who the owner is and what they paid.”
In real estate, many of the biggest deals in Manhattan, Malibu, Aspen, the Hamptons and Palm Beach are now in private or “off-market” sales. Also known as “whisper” or “pocket” listings, off-market properties are not listed on multiple listing services or public websites but are shopped around quietly 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 expensive townhouse ever sold downtown. A 13,000-square-foot mansion in Palm Beach sold off-market for $60 million, making it one the most expensive non-waterfront homes ever sold on the island. And Aspen’s first sale of over $100 million — Patrick Dovigi’s mansion on Red Mountain 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 listed homes.
Over time, according to Douglas Elliman real estate agent Ernie Carswell in Los Angeles, wealthy, not but famous, sellers have joined in on the off-market craze.
“Even the average multi-millionaire or billionaire likes the idea of selling without the media and privacy invasion,” Carswell said.
Carswell said he currently has a billionaire client in New York who wants a special property in Los Angeles, so Carswell is looking at a mega-mansion owned by a Middle Eastern billionaire who is offering it only to select buyers. He’s also working on a deal in Palm Springs with a celebrity selling a home he didn’t want to be publicly shown to a billionaire buyer who doesn’t want any photos of his new home on the web.
“They don’t want burglars to know how to get to the bedroom, or how much land there is 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 since they have a larger possible buying pool and benefit from broader marketing. But for special mega-homes in Malibu, Bel Air or Beverly Hills priced over $20 million, the list of potential buyers is smaller, and most are already known to the brokers, which makes an off-market agreement more appealing.
That makes broker relationships even more important — especially to the wealthy, Carswell said.
“Never before has the need for a skilled, connected real estate professional been more valuable, especially at the high end,” he said.
Still, some brokers say even for pricey properties, sellers who go private don’t get the highest price since they’re limiting their 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’re paying a premium for that.”
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