Inside the secret world of super-rich property sales
Lifting the veil on luxury property
For the super-rich buying and selling a home doesn't involve scouring internet listings for hours or endless open houses. We take a look at the incredible things that go on in the world of luxury property.
Where the super-rich are buying
According to a report by Sotheby’s International Realty, the US continues to be the most popular destination for millionaire property investors. Top universities and a stable economy encourages wealthy Americans to continue investing at home, while foreign investors are keen to sample a piece of the American pie.
Every city has its hotspots
In New York, the Upper West Side and the Upper East Side are the prime spots, according to property developer Edward Mermelstein. Meanwhile, in London the borough of Kensington and Chelsea has an air of prestige that continues to draw in wealthy property investors.
Discretion is key
You can tell a good estate agent by their discretion, as celebrities and the rich prefer to keep things confidential. More often than not, they’ll contact agents using different names, or turn up to viewings in disguise, wearing hats and sunglasses so as not to draw attention to themselves.
They hire people to do the groundwork for them
Most wealthy individuals don’t have time or patience to go through the initial groundwork of searching for a new home, so they hire companies to do it for them.
They want to be able to make quick decisions
The super-rich are out there making multi-million dollar business decisions on a daily basis, a no-nonsense approach which they apply to buying and selling property. They expect straightforward answers and immediate results.
Their agents work even harder to sell their properties
Sotheby’s International Realty CEO Phillip White told CNBC that estate agents have to work twice as hard when selling luxury properties. A $9 million (£6.9m) home is a sizeable investment and “they [sellers] want a targeted, discreet marketing program. There are not a lot of people who can buy some of these places, and we have to work hard to get in front of the right people."
Agents start the schmoozing early
That's why luxury property agents go above and beyond the expected to maintain a healthy network of VIP clients. While gifts and fancy dinners have become common practice, top agents have gone the extra mile by organising networking events and exclusive parties for their customers. Some go as far as arranging private museum and gallery tours for clients who happen to be visiting from abroad.
The super-rich make their agents work hard to find the right property
When it comes to investing in a multi-million dollar home, the sky really is the limit for the ultra-wealthy, who often request the near impossible to be included in their property searches. Francois-Xavier de Vial of luxury property agency Home Hunts was once asked to source a French chateau that included a full-size car racing track.
But it's not always about asking the impossible
In Edward Mermelstein’s experience, it’s not all about extravagance though. Wealthy foreign buyers are looking for conservative assets in New York, "Our clients do not want anything that is very loud, they want to be in specific locations and in properties that are well regarded". So it’s not all about extra parking for luxury cars or helipads – though sometimes that stuff is important too.
They can buy properties before anyone else
When a property is put up for sale it usually ends up on a local Multiple Listing Service, a database used by brokers to share information about properties on the market. The super-rich have access to properties before they’ve made the list. This ensures they’re investing in an exclusive property, while retaining an element of privacy.
And they will often only sell to a select group
Just as the elite few choose to purchase their properties off market, the same level of discretion is applied to house sales. The ultra-rich often sell their homes by so-called 'pocket listings', which only allows certain buyers the opportunity to view and buy it. Meanwhile, some celebrities have been known to sell in the name of charities and trusts, partly as a way of reducing their tax bills.
They’ll buy up the neighbourhood
According to Michael Pallier of Sotheby’s International Realty, the ultra-rich will go to extremes to maintain their privacy. When they don’t want prying neighbours, they simply buy any neighbouring houses.
Or they'll buy in hidden areas
Protection of privacy is of utmost importance to the wealthy, especially when it comes to protecting their multi-million dollar homes and belongings. An increasing number of wealthy people are purchasing homes in hidden communities, such as Hidden Hills in L.A, a secret gated community where Google photography vehicles are banned from creating images on Google Street View.
Courtesy Edward Mermelstein
Homes should be investments too
Edward Mermelstein says he will often guide his overseas clients on the best places to buy in Manhattan and Miami with property values and return on investments in mind, but also how the profile of the neighbourhood will sit with the family. "Many of our customer purchase with the intent of living in the US, as they are often fleeing political or economical instability. But it's about preserving wealth so they have to know the property will be worth more in five years than what they paid for now."
Even the super-rich take out mortgages
The ultra-rich tend not to purchase properties upfront, even if they have the finances to do so. This is because taking on a mortgage can free up a significant amount of cash that can be invested in further properties or businesses. Those with good credit and assets often have the freedom to negotiate lower rates.
Though there are instances when they pay in full
One of the perks of being a millionaire is having the choice to pay for a property upfront if you want to. Most wealthy individuals will only pay for their homes upfront if they’re buying abroad. This is often done when they need to get money out of their home country for one reason or another.
There are often sweeteners to seal a deal...
Savvy sellers are aware that parting with a six-figure incentive is worthwhile in the grand scheme. From artworks by Damien Hirst to exclusive club memberships, the incentives used to entice buyers are prizes in their own right. One luxury estate agent told us that he once witnessed a seller offering his Rolls-Royce Phantom – worth $460,000 (£350k) – as a sweetener. And it seemingly did the trick.
...but they don't have to be glitzy
But more mundane incentives are important too, from developers offering to pay solicitors’ fees to guaranteeing a minimum rental income if the property is going to be rented out.
Property is a way to make even more money
Andrew Giller of The Buying Solution claims that a vast majority of wealthy individuals are making their millions from property development. They’ll buy a house, hire a team of builders and designers to renovate the property and sell it on having pocketed several million dollars worth of profit. This is why many of the luxury homes you see in affluent neighbourhoods appear empty or uninhabited.