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Warren Buffett Secures $125B In Real Estate Deals

Warren

Residential brokerage HomeServices of America, owned by Warren Buffett’s Berkshire Hathaway, has grown to become the second-largest real estate brokerage in the U.S., trailing only Realogy Holding’s NRT unit.

What seemed like only an afterthought, is only just getting started … with global ambitions.

Berkshire Hathaway bought HomeServices in 2000 as part of an electric company, but since then, it’s turned Buffett into a real estate brokerage beast of sorts, closing $125.4 billion in transactions last year.

The company represented 328,355 “sides”—buyers and sellers—representing a 34-percent jump from the year before.

According to the company's annual report, Berkshire Hathaway's real-estate business, which includes owned and franchised brokerages, earned $220 million last year, down from $225 million the prior year as higher operating costs offset rising revenue from acquisitions and higher home prices.

Earlier this week, U.S. National Association of Realtors reported existing home sales rose 3 percent in February. Nationally, 5.54 million units sold ending after the previous two months had seen declines. Housing inventory rose last month but is still down 8.1 percent from 12 months ago.

According to a report from Zillow, the value of the entire U.S. housing stock increased by 6.5 percent last year, or $2 trillion—the fastest gain in home values since 2013.

A string of acquisitions has helped boost Buffett to the number two spot:

Last year, HomeServices purchased long time competitor Long & Folster, taking over its mortgage, settlement services, insurance and property management businesses. Long & Folster, which ranked third among American real estate brokerages, closed $28.9 billion in sales volume last year.

Also last year, HomeServices acquired the 12th-ranked brokerage, Houlihan Lawrence real estate agency, adding 1,300 agents across 30 offices to its portfolio. That deal gave HomeServices of America a total of 40,950 agents and 1,400 offices. Houlihan Lawrence had $6.7 billion in sales last year.

Then in April last year, Berkshire Hathaway purchased New York City based Gloria Nilson & Co. Real Estate.

These three purchases are putting Buffett within striking distance of the Realogy Holding’s NRT unit, which operates under brands such as Coldwell Banker and Sotheby’s.

Buffett seems to be gunning for the top slot. Related: U.S. Stocks Trim Losses Following A Wild Month

In his annual letter to Berkshire Hathaway shareholders, the legendary investor wrote that despite its recent acquisitions, HomeServices is on track to do only about 3 percent of the country’s home-brokerage business in 2018. “That leaves 97 percent to go. Given sensible prices, we will keep adding brokers in this most fundamental of businesses.”

According to a new ranking from Real Trends, number three on the list of the largest real estate brokerage in the US is Pittsburg-based Hanna Holdings, with 90,468 transactions, followed by Keller Williams Realty, GO Management Offices with 34,077 transactions.

Berkshire Hathaway’s HomeServices also plans to continue its international expansion and is looking to Europe, Asia and Latin America.

Earlier this month, it added Berlin-based Rubina Real Estate GmbH to its franchise network. Rubina focuses on acquiring international investors for the German real estate market, especially from China, India and the Arab world.

By Tom Kool for Safehaven.com

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