Halls of Shrewd'm / US Policy❤
No. of Recommendations: 1
Major transaction could come soon.
Quite the coincidence up $8 as the market tanked. Not.
No. of Recommendations: 1
No. of Recommendations: 1
Quite the coincidence up $8 as the market tanked. Not.
I don't think one has anything to do with the other and sort of doubt this is material or particularly bullish news for Berkshire but it does show the times 'a changin' with operating subsidiaries being shopped for sale (if it turns out to be true).
No. of Recommendations: 0
Sell that pig. We don’t know anything about that business.
No. of Recommendations: 8
If they can reach an agreement to sell the RE brokerage biz I think that many will be shocked as to how little money BRK receives for it. The lawsuits that won have totally changed the commission structure of the industry. One has to talk to a practicing realtor to get a better idea of how things now work. Best to get out of it.
No. of Recommendations: 2
“it does show the times 'a changin' with operating subsidiaries being shopped for sale (if it turns out to be true).”
I hope it is true and quietly vote “For” pruning our redwood in a few select businesses. A li’l bit leaner Berkshire seems to be pretty reasonable imo if the deals are sensible. I highly doubt of course that we’d ever sell anything with significant and growing earnings.
No. of Recommendations: 3
From my brokerage newsletter.
DJ Buffett Hates Selling Anything. The Sale of Berkshire's Real Estate Unit Would Be Unusual. -- Barrons.com
Andrew Bary
Berkshire Hathaway CEO Warren Buffett has been loath to sell any company subsidiaries, so a report that Compass is in talks to buy Berkshire's real estate brokerage would mark a notable change.
The sale, if it occurs, could mean Berkshire is willing to sell more of its smaller non-core units -- potentially streamlining the company and making it more manageable for Buffett's likely successor, Berkshire executive Greg Abel.
The Wall Street Journal reported late Thursday that Compass, a top real estate broker, is in advanced talks to buy the Berkshire business, Home Services of America, one of the largest real estate brokerage firms in the country.
No price was mentioned in the article but it is possible that Berkshire could get a few billion dollars for the unit.
It isn't easy to value Home Services of America because it's operating close to break-even. Barron's is assuming a value of less than the larger Compass. That price would be a rounding error relative to Berkshire's $1.1 trillion market capitalization. Given the size of the two companies, there could be antitrust scrutiny.
Home Services is smaller than Compass with $4.4 billion in sales last year.
That compares with $5.6 billion for Compass, whose shares finished Friday at $8.73, down 0.8%. The stock was little changed in after-hours trading. Compass stock is up 144% over the past year and now has a market value of $4.7 billion.
Like much of the rest of the real estate brokerage industry, Home Services was hurt by a dearth of homes for sale in 2024 and high home prices.
Home Services lost $107 million from operations in 2024 after netting $13 million in 2023 and $100 million in 2022. Part of the 2024 loss stemmed from a $250 million settlement payable over four years that the company reached for a lawsuit involving real estate brokerage commissions.
Compass also was unprofitable last year on a GAAP basis but generated $150 million of cash flow before payments for the industry class-action settlement, the company said in its fourth-quarter earning release.
Home Services operates under 48 brand names with approximately 37,700 real estate agents in nearly 820 brokerage offices, according to the Berkshire 10-K report. It has a network that includes about 270 franchisees and over 1,400 brokerage offices with about 44,700 third-party real estate agents under two brand names.
Chris Bloomstran, who follows Berkshire closely as head of Semper Augustus Investments Group, an investment firm, has pegged the brokerage unit's annual sales volume at about $125 billion. The business is housed inside Berkshire Hathaway Energy, the company's big utility operation.
Buffett, 94, has repeatedly stated Berkshire doesn't like to part with any subsidiary unless it is hopelessly unprofitable.
"Berkshire almost never sells controlled businesses unless we face what we believe to be unending problems," Buffett wrote in his recently released 2024 annual shareholder letter.
The potential sale of the business is also notable because Home Services of America is a market leader and stands to benefit from an upturn in real estate sales.
There was no immediate comment from Berkshire or Compass.
Berkshire stock was up 1.5% Thursday to $756,910 and has risen 11% so far this year, outpacing the S&P 500 index, which is down 6%.
Write to Andrew Bary at andrew.bary@barrons.com
No. of Recommendations: 3
I have properties for sale with different agents The commission structure is unchanged..its just gone underground..
No. of Recommendations: 14
No. of Recommendations: 0
” Home Services is smaller than Compass with $4.4 billion in sales last year. That compares with $5.6 billion for Compass, whose shares finished Friday at $8.73, down 0.8%. Compass stock is up 144% over the past year and now has a market value of $4.7 billion.”
Glad to see this. Fewer headaches, more cash. Since the article does not speculate about price, I’m curious; would the numbers above suggest a market value of $3.6 billion for Home Services? Does anyone know how much the business is worth on BRK/BHE’s balance sheet?
abromber
No. of Recommendations: 3
I am currently selling some residential real estate in the US. Given recent headlines, there might be some room for negotiating commissions, no?
There are 4 or 5 “good” local brokerages. I approached each of them, suggesting we negotiate an alternate commission, or commission structure. My idea: 1% on, say, the first million (an amount I figured I could get on my own) and 20% on anything above that.
Most of the firms agreed to negotiate, but none would consider a stepped fee, or go below 5% (combined for both brokers). This is the standard pre-settlement deal. BHRE heard my idea, and gave me a flat no, no offer to negotiate anything, no interest in continuing the conversation.
Maybe we haven’t heard the end of the legal problems in the industry?
No. of Recommendations: 0
You can definitely get below 5%- that is so high
3-4 will attract the agents who are not that busy given the slow down in several areas.
No. of Recommendations: 1
My idea: 1% on, say, the first million (an amount I figured I could get on my own) and 20% on anything above that.
A "cliff" like that is usually a good incentive to get a higher price. However, it is also an incentive to NOT deal with anyone who will pay less than $1.2M (for them to earn commission roughly equal to what they usually get, say 4% or so). If they sell it for $1.05M, they earn very little, perhaps 1/4 of what they usually earn. In the absence of a plethora of buyers/bidders, that property will remain on the market for as long as it takes to reach that $1.2M+ price.
No. of Recommendations: 2
Let's make this even more on topic. What would Munger and Buffett do?
They've long emphasized the importance of reputation and trust in business dealings. In real estate, a broker's reputation can significantly impact the success of a transaction:
Trust and Credibility: A well-respected broker builds trust with clients and other agents, which can smooth out the transaction process.
Market Knowledge: Experienced brokers often have deep insights into local markets, potentially leading to better pricing strategies and negotiation outcomes.
Network Effects: Respected agents may have better relationships with other professionals in the industry, which can help deals close more efficiently.
Quality of Service: Full-service brokers might offer more comprehensive support throughout the buying or selling process.
I've used the same RE broker for many properties in Southern California over the years. Reputation does make a difference, especially selling properties. When buying you always go directly to the listing broker.
No. of Recommendations: 2
Per the results of the lawsuits you are only legally responsible for paying 1 side of the commission. So if you have a selling agent representing you it would be a 2.5% commission. If the buyers have an agent they are responsible for paying that agent 2.5%. In fact a realtor will not even show buyers a listing unless they sign in advance a legally binding document that if they should then purchase that property they are responsible for paying that agent a commission.
The problem is, and I think you are right about the possibility of more lawsuits,is that sellers are being pressured to agree to pay the entire commission which is the way that the industry has traditionally done business. How are they being pressured? They are being told that if they do not agree to do so it is unlikely that realtors will show their property.
This is no longer the business it was when BRK entered into it. I really do hope that they exit it. Think the Barron's article mentioned the sale price possibly being $2 billion. That is more than I would have expected.
No. of Recommendations: 1
NOPE, IN REALITY ,NOTHING HAS CHANGED.......OOPS,sorry did not mean in all caps
No. of Recommendations: 0
Article in yesterday’s New York Times
https://www.nytimes.com/2025/03/15/realestate/sell... (Paywall)
Home Sellers and Buyers Accuse Realtors of Blocking Lower Fees
A year after a landmark settlement called for a disruption in how real estate agents are paid, people say they still feel forced to pay them excessive commissions.“Average commissions dropped from 5.64 percent to 4.96 percent” since the settlement.
It is looking like offering the Berkshire Hathaway name to this shady business may have been a mistake.
No. of Recommendations: 0
its still mostly 3% and 3% here in TX and our market in my area is not moving ...
