Warren Buffett is getting into the real estate business big time, as I noted yesterday, having launched Berkshire Hathaway Home Services,
Buffett's growing real estate empire, which is talking a lot about targeting Millennials and selling luxury homes, will soon be doing business in the Boston area.
It's an interesting play that has a lot of implications for the various players in the business of helping Americans buy and sell homes.
Here's what I found most surprising: Buffett clearly believes the real estate brokerages and agents are here to stay, even if the business badly needs an injection of young talent and a much savvier approach to technology.
In Buffett's vision of where the real estate business is headed, agents are still out there doing deals, they are just younger and more tech savvy.
That's got to be a bitter pill for the Realtor haters out there, who have spent years ranting about how agents are a waste of time.
Yes, for a few people they are, but for the vast majority of home buyers and sellers, who are on the family/work treadmill without endless horus to spare, real estate agents still provide a needed service.
If that wasn't the case, the for-sale-by-owner movement would have long ago put Coldwell Banker, RE/MAX and the industry's other big players out of business,
Yet Buffett's move should make industry's traditional players very nervous as well.
While real estate agents may be here to stay, consumers are hardly in love with the business. There are legitimate questions on everything from commissions to the level of training and expertise home buyers and sellers are getting when they sign up with the average agent. Yes there are lots of good and even great agents out there, but there are some really bad ones as well, and, compared to other fields, the barriers to entry are very low.
So watch out. Buffett has taken the measure of the competition out there and figures he can do better.
But neither would I be too confident if I were sitting in the West Coast headquarters of Zillow, Trulia or Redfin.
These tech-centered upstarts have certainly made inroads, but at the same time, they haven't revolutionized the business of selling and buying homes.
Here again, Buffett has taken the measure of the competition and found it lacking, with plans for Berkshire Hathaway Home Services to start its own national database open to consumers.
But in the end, it all comes down to execution. So far, there's been a lot of talk and speculation about Buffett's push into residential real estate since he spent billions last year to snap up the Prudential franchise last year, but not a lot of evidence of real change yet.
On that note, here is a rather interesting tidbit from Bill Wendel over at the Real Estate Cafe:
One should not judge a book by it's cover, but the oversized, white-on-white Berkshire Hathaway booth at the National Association of Realtors convention in San Francisco in November 2013, was about as inviting as a living room with plastic dust covers on the furniture. Aside from the Berkshire Hathaway staff, the booth appeared to be getting little traffic; but if you target the right market niche, maybe that?s all you need to prosper. As this link documents, BHHS is targeting the 1% - "the luxury market to the world's most high-end consumers seeking a life without compromise."
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