As technology costs escalate for small and privately owned real estate companies, many are entertaining mergers with larger firms in order to remain competitive with burgeoning online brokerages, The Washington Post reports. One of the biggest examples of this is the acquisition of Long & Foster Real Estate by HomeServices of America, an affiliate of Berkshire Hathaway, in early September.
Several more real estate mergers have occurred in just the last six weeks. Five days before it was bought by HomeServices, Long & Foster had purchased Evers & Co.; HomeServices also acquired a North Carolina brokerage; and Douglas Elliman Real Estate in New York purchased Beverly Hills, Calif.-based Teles Properties.
HomeServices is on the hunt to acquire even more real estate companies, says billionaire Warren Buffet, owner of Berkshire Hathaway. “We like both aspects of the real estate business and expect to acquire many REALTORS® and franchisees during the next decade,” Buffett wrote in a note to shareholders.
Ron Peltier, chairman and chief executive of HomeServices, told the Post that for the last 20 years, HomeServices has been on a mission to “aggregate” companies in key markets, “creating scale and synergies. The industry is very fragmented, and with the costs of business continuing to rise, having scale is critical,” he says.
Long & Foster’s merger with HomeServices may prompt other real estate brokerages to consolidate, some industry experts say. “The fact that [Long & Foster founder] Wes Foster considered doing this has caused many of his peers to reconsider whether they should stay private or seek a buyer,” says Steve Murray, president of REAL Trends, a real estate consulting and communications firm.
Source: “Traditional Real Estate Brokerage Firms Get hit by Wave of Consolidation,” The Washington Post (Sept. 17, 2017)