Inside Wealth

Zuckerberg snatches up Palo Alto homes in privacy bid

Zuckerberg wants his privacy
Zuckerberg wants his privacy

It's Friday morning on Edgewood Drive in Palo Alto, Calif., and none of Mark Zuckerberg's neighbors want to talk about the fact that he's just bought four more houses on their street.

The Facebook founder worth close to $20 billion has been buying up the four homes not to tear them down, but to take their backyards for his own, and to use the houses as a buffer.

Zuckerberg has no plans to build a McMansion on the four additional properties adjacent to the home he already lives in with his wife, physician Priscilla Chan. The Zuckerberg's plan is to lease back the existing homes to the families that already live there. Those families got extremely lucky: they made multimillion-dollar sales, get to live in their existing homes and all they did was give up their backyards and title.

Zuckerberg paid way over market rates, in fact one of his neighbors who only spoke to us on condition of anonymity, said he paid over $14 million for a house that would not have gone for more than $4 million before he came to town. The $14 million home on Hamilton Avenue is a 2,600 square foot home on .39 acres, which is actually a lot of land in this tony Valley enclave.

Then there is the 3,200 square foot house directly behind Zuckerberg's Edgewood Drive home also on Hamilton Avenue. It went for a paltry $4.8 million in December 2012, according to public records.

(Related video: Is Facebook worth $50 billion?)

Then a third house he bought next door on Edgewood Drive went for $10.5 million. And the fourth home on the other side of his main house on Edgewood Drive sold earlier this week for an undisclosed amount.

All told Zuckerberg paid more than $30 million for the four homes adjacent to his main property. While it's no surprise he overpaid for the adjacent properties, one neighbor said "he doesn't care, it's a drop in the bucket for him."

She added that Zuckerberg's arrival to the Crescent neighborhood of Palo Alto is driving up prices for sellers and making it completely unaffordable for other buyers to purchase properties in the neighborhood.

Zuckerberg used the tactic of forming a shell corporation to hide his identity when he purchased his main house, the $7 million house on 1456 Edgewood Drive in 2011. And since then, Zuckerberg has been negotiating with his neighbors and they have been holding out in an effort to get higher prices.

(Read more: Versace mansion sale disappoints)

Donald Van de Mark, a prominent Northern California real estate agent and former CNBC anchor, said Zuckerberg, Google's Larry Page and Yahoo's Marissa Mayer are part of a tech cadre that are "outliers that completely skew the market." He went on to say that the success of Facebook, Google, Yahoo and other tech companies in Silicon Valley, San Francisco and elsewhere in the Bay Area are creating levels of wealth never seen before on such a scale.

"These are very affluent people, they can pay anything they want," said Ken DeLeon, owner and founder of DeLeon Real Estate. DeLeon was named the number one real estate agent in the entire United States by The Wall Street Journal last year.

DeLeon said he sold more than $250 million in real estate in the Palo Alto area in 2012, and is on track to sell more than $300 million this year. At 3 percent commission, Ken DeLeon has made close to $16 million in 21 months selling real estate in Palo Alto. That's close to the salary of a top-tier baseball, football or basketball free agent!

DeLeon said what is going on in Silicon Valley is unlike anything anywhere in the country, or frankly, recorded human history.

"People in this category don't care about $100,000, or even million extra dollars, that's really nothing, they just want their privacy and their peace," DeLeon added.

"Billions are being created here, and really, the Valley has never been stronger. So if a billionaire wants that property, you can just tell your client, who's not a billionaire, you're not going to get it," said DeLeon, and that just drives the asking price higher.

—By Mark Berniker, CNBC Silicon Valley Bureau Chief.