Sent in from a reader:
Ah, but there is one thing a company like Berkshire Hathaway can do if it develops dominance in the market.
It can decide not to participate in the MLS by setting up its own in-house version.
Suppose it can get more than half the listings for itself. It will get both sides of each commission, and with BH having more than half the house listings, sellers and buyers will prefer to deal with it rather than with the all the little fish who work through MLS.
If BH became dominant, it would also attract the best agents and many of the weaker companies outside BH would fall by the wayside. There are other advantages, too; less oversight of BH’s operations; freedom from the restrictions imposed by MLS.
I have seen this situation with commercial property. I have lived in communities where one real estate firm was so dominant it simply didn’t participate in the MLS, glommed up the best listings and sales and starved the competitors for business.
David Amkraut, Los Angeles attorney and investor
Thanks for the thought, David, and I agree, BH HomeServices could dominate the real estate selling business. They already had 16,000 agents before partnering with the 53,000 Prudential Real Estate and Real Living agents – 69,000 total!
They have to compete with NRT though, who operates 13,800 offices with 241,000 sales associates doing business in 103 countries and territories around the world under the Century 21, Coldwell Banker, ERA, Sotheby’s International Realty, Coldwell Banker Commercial, and Better Homes and Gardens Real Estate brands.
Don’t forget Keller Williams, Redfin, and the Independents – it is a big playing field!
The most important part of the Berkshire move is the management team – and they are going to stick with the existing folks, many who come from the relocation side of the business. The CEO said that it would take five years to build a nationwide brand from scratch, and merging and partnering is more efficient.
Maybe, but it could also be a scramble to survive.
This low-inventory environment is disasterous for realtors – especially for those with low skill sets. The big franchises who make the bulk of their profit from the low- and medium-grade agents have to be feeling it. The stats in the previous post here showed it – most realtors aren’t selling anything these days, and there is little reason to think it will change in the near future.
The higher-producing agents control the future – where will they choose to work?
The big franchises don’t have any more money to offer them – the commission splits are already favorable to the good agents, and the franchises can’t depend on less-productive agents. The existing top-producers are going to stay put, just because it is a hassle to change companies, and they are hoping to get out of the business shortly anyway. Realtors new to the business aren’t going to feel enough loyalty to stick around these revolving-door franchises, so the attrition of young and old agents has to be high already.
Can the big stodgy corporations, who have only gobbled up independent companies in the past, suddenly become innovators, and offer their agents something they can’t get elsewhere? Doubt it.
Yet I think it is possible for a revolutionary company to take over the industry, and attract any type of realtor to work there.
I wouldn’t be surprised if BH or NRT takes a run at Redfin, just to get their website and eyeballs. The Redfin VC money probably wouldn’t mind being repaid right about now, and it would enable the buyer to appeal to younger and more savvy consumers. There would be the little problem with dissolving the Redfin kickbacks, but that’s why they have PR people.
The real estate market is ripe for a big player to dominate, but it’s not going to come from within. There are 1,000,000+ realtors across the country, and the existing system is too ingrained to be turned upside down.
It’s going to take an outsider to blow it up.