Update on Buffett’s Adventures in the Real Estate Market

Warren Buffett has always seemed to know the right consumer brands to invest in – ranging anywhere from Geico to Diary Queen – but now his eyes have set aim on a new target, the real estate market.

Following up on our story from last fall “What’s the Value of Your Real Estate Brand?”, we thought we’d check-in on the growth of Berkshire’s HomeServices of America, as well as seeing if this brand has influenced consumers’ decisions on choosing a real estate brokerage firm.

Warren Buffett Sells Homes
Since last year, ‘For Sale’ signs bearing the Berkshire Hathaway HomeServices name have been popping up on lawns from New Jersey to California as Buffett expands his real estate operations and licenses the name to independent brokerages.

This expansion has come at a cost though. In recent years, Berkshire’s HomeServices of America has spent nearly $500 million on acquisitions, including a majority stake in a venture licensing the Prudential and Real Living brand names to more than 500 brokerages, as well as ownership of eight additional brokerages in cities ranging from Philadelphia to Seattle.

These purchases have not only increased the company’s agent force by about 50 percent, they have also boosted the company’s total sales to $55 billion in 2013, an increase of $13 billion from the year before. Its operating profit was $117 million in the first nine months of 2013, more than double a year earlier.

Seeing this growth, many agents are delighted to work under the Berkshire Hathaway banner. New Jersey listing agent Helen Sherman spoke at an open house in December, stating that the Berkshire Hathaway name gives people confidence and a sense of stability when making the decision to buy a home.

Not all brokers and agents are excited about using this branding to close deals though. “A bunch of bad actors could sully the brand,” said Jeff Matthews, a Berkshire share holder. As a result, some HomeServices owned brokerages have elected to continue to operate under their own names, such as Edina Realty in Minnesota.

While NAR suggests that just 3% of buyers pick an agent because he or she was associated with a particular shop or franchise, many agents and brokers seem to have mixed feelings on the influence a brand name makes.

Do you think that Berkshire’s HomeServices’ growing profits are a result of using a brand name, or are they just the product of an improving market?

What are your thoughts? We’d like to hear from you.

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