Seagram heir Edgar Bronfman Jr. generated splashy real estate headlines in July when he closed on his East 64th Street townhouse for an eye-popping $50 million — and that’s how New Yorkers learned his property was even on the market. When you’re a Seagram scion with deep pockets trying to sell a home, discretion is at a premium. That’s why Bronfman — and many others in his financial weight class — often enlist brokers to quietly pitch property to prospective buyers.
When you’ve got it, in this instance, don’t flaunt it.
In Bronfman’s case, the 31-foot-wide residence — which fetched the second-highest price to date for a townhouse in New York City history — was the latest luxury property that went into contract without being placed on the market.
In the world of big-time New York City real estate, wealthy and powerful owners have used unpublicized listings to sell a property when prudence is desired. While most brokers say they are reluctant to participate in such secretive dealings, sellers like Bronfman sometimes discreetly test the waters to see what their property can command.
“I have a lot of clients who have trophy properties that I don’t have to sell, but they say, ‘If you can get me a certain price I will,'” said Patricia Burnham, president of her own Manhattan-based real estate firm, P.S. Burnham.
The practice is almost always limited to the most expensive transactions, for properties owned by high-profile people whose wealth reaches into the stratosphere, explained Kirk Henckels, executive vice president and director of Stribling Private Brokerage. Typically, off-market property sales start at $20 million, a price tag that could generate wide public attention, Henckels added.
Curiosity regarding what the market would bear and avoiding publicity are the most common motivations for a sub-rosa sales pitch. But on occasion, a fabulously wealthy owner wants to create buzz in their own social circles, knowing the information would eventually leak.
“Some people live in 18 rooms. It’s not that they have to move, but they want to show [off their wealth],” said Laurance Kaiser IV, president of Key-Ventures.
Other times, worry about publicity is legitimate: A couple may be going through a messy divorce and trying to keep their business from exploding on tabloid gossip pages.
Rules set by the Real Estate Board of New York require member brokers to publicly disclose a listing within 72 hours of signing an agreement with the seller to exclusively market the property, explained Neil Garfinkel, attorney and residential counsel for REBNY. Under that arrangement, the listing is shared by brokers in that community, giving other agents an equal chance at bringing in a buyer.
Brokers are not flouting the rules if they manage to sell the unpublicized property in less than 72 hours. Most often, owners already aware of that rule will tell a broker that if they can get X price in 24 or 48 hours, they’ll sell.
But the guidelines exist to protect the interests of the seller as well as to create a more competitive marketplace, Garfinkel said. If the seller doesn’t make the fact that her property is on the market known to other brokers or to a lot of buyers, she is probably limiting the sale price.
“This is no way to market a property,” Stribling’s Henckels asserted. “Sellers achieve the best price by casting the widest net.”
Added Barbara Fox, president of the Fox Residential Group, “I see no advantage. The only way to sell property is to show it to customers.”
The 72-hour rule affects all REBNY members unless owners state in writing that they don’t want the listing shared with other brokers.
Sanctions include fines, suspensions or even loss of membership from the organization if an agent violates the rule, Garfinkel said. While the vast majority of brokers in Manhattan belong to the powerful trade organization, those who aren’t REBNY members don’t have to abide by its rules.
Kaiser claims that during his 40 years in the real estate industry, he has participated in just one unlisted sale from start to finish. It was the apartment of a friend who wanted to avoid the hassle of going through the extensive sales process.
While the decision to quietly send signals may seem like a good idea for people who fiercely protect their privacy, quite often, the opposite effect occurs. Henckels advises that even some of the most high-profile owners should sell their property through the conventional method rather than make it seem like they have something to hide. Eventually, real estate sales become part of the public record, and rumors can swirl at an unforgiving pace.
It is commonplace for inner-circle cocktail party discussions, where many of the luxury real estate brokers are invited, to reach doormen of the city’s most exclusive buildings before the caterers have finished cleaning up, brokers say.
“If it’s going to get out into the press and it’s public record, you might as well control the press rather than have it control you,” Henckels said.
There are pitfalls for the broker as well. Wendy Maitland, senior vice president for Brown Harris Stevens, said agents generally discourage the practice because the seller is not legally obligated to their broker if a transaction is completed. Therefore, if a property is closed, there is no guarantee the broker will get paid.
Secrecy in the industry is difficult to protect. Most brokers know each other, Maitland said, and they may attend one of those cocktail parties thinking they have an inside track. But by the time the night is over, the news is all over town.
“The community isn’t as secretive as people would think,” Maitland said. “We’re all friends with one another, and we work together.”