Berkshire Hathaway brings brokerage service to Maryland

  • Broker Scott Lederer poses with what will be new signage as Prudential moves forward with company changes Thursday, May 15, 2014.
Broker Scott Lederer poses with what will be new signage as Prudential… (Karl Merton Ferron, Baltimore…)
May 17, 2014|By Natalie Sherman, The Baltimore Sun

There will be fewer of the familiar blue-and-white Prudential signs marking homes for sale across the Baltimore region next month as some are replaced with plum-colored signs bearing another storied name.

Berkshire Hathaway, the company headed by billionaire investor Warren Buffett, began branding a national network of real estate franchises last year. Nationwide, with more than 28,000 agents and 750 offices, including about 200 Maryland agents, has affiliated with Berkshire Hathaway HomeServices since it launched last September.

"If you haven't yet, many of you will soon be seeing our name on 'for sale' signs," wrote Buffett in his 2013 letter to shareholders released Feb. 28.

Industry members and analysts said Buffett's willingness to give the Berkshire name to the franchise network is a vote of confidence in the housing market from an investor famous for betting on assets he considers undervalued. It also marks an expansion of the company's already significant real estate holdings at a time when the industry is undergoing consolidation, spurred by the recession and possibilities opened by technology.

"Americans spend a lot of money when they're buying and selling homes, and I think Berkshire Hathaway said, 'Well, this might be a very good way to leverage a better position in that industry,' " said Steve Murray, president of REAL Trends, a Colorado-based research and consulting company.

In business since 1998, HomeServices of America — a Berkshire subsidiary — created the Berkshire Hathaway HomeServices brand when it assumed control of Prudential Real Estate as part of a joint venture with the company that bought Prudential Real Estate from the Prudential Inc. life insurance company. HomeServices of America was ranked as the country's No. 2 broker based on number of deals and dollar volume last year, according to REAL Trends.

About 35 percent of the roughly 1 million agents nationwide are affiliated with one of four companies, including HomeServices of America, as the industry consolidates, Murray said.

A 2012 report by the Ibisworld research firm estimated that the number of real estate franchises or enterprises declined 6 percent each year between 2007 and 2012 as smaller groups closed or affiliated with bigger companies to help recession-battered finances and take advantage of scale and training.

The Berkshire name is entering the Baltimore market through Prudential Homesale YWGC Realty, a Pennsylvania-based franchise with 196 Maryland agents that is becoming Berkshire Hathaway HomeServices, HomeSale Realty.

"Berkshire brings a lot of cachet to the business and our agents," said Scott Lederer, Maryland regional president of Berkshire Hathaway HomeServices, HomeSale Realty, noting that a March Harris poll ranked the new name the country's top real estate brand. "Our agents absolutely love the transition."

HomeServices of America also owns Champion Realty, a Severna Park-based group with 236 agents.

The Prudential name isn't going away. Prudential PenFed Realty, with 484 agents in Maryland, is sticking with its brand for now. However, it is a franchisee of a company that is owned by the HomeServices joint venture. Buffett has said HomeServices will gradually rebrand its franchisees and the firms it owns.

In Maryland, where the state licenses roughly 38,000 agents, Virginia-based Long & Foster is the largest company, with 4,049 licensed agents. It's followed by Chicago-based Realogy, the nation's largest residential real estate operation with brands such as Coldwell Banker and Century 21, which has more than 2,000 agents, according to the Maryland Real Estate Commission.

Still, the real estate industry remains fragmented. A 2013 survey by the National Association of Realtors estimated that 56 percent of its members work for independent, non-franchised firms. Many said the power of local networks remain strong, allowing smaller, local companies to thrive.

"When you're small like us, you can be very nimble. You don't have all the overhead, and you can kind of niche yourself into certain aspects or marketplaces," said Daniel Hoff, who leads a two-person real estate team at the Samuel C. Hoff Agency in Westminster.

Murray said he expects the nation's biggest real estate companies — three of which are publicly traded — to continue swallowing smaller brokerages as they work to deliver growing profits to shareholders in an environment of limited housing market growth.

Last year, for example, HomeServices of America made a number of significant brokerage acquisitions, propelling earnings from $82 million to $139 million. Just last week, it announced the purchase of a major Silicon Valley real estate firm.

With the flat real estate market nationwide, the easiest way to grow is by recruiting more agents to sell more homes, Murray said. Many aging brokerage owners are more interested in selling, as the housing recovery makes their companies more valuable, he added.

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