Is Warren Buffett Selling Out to Compass? No Word Yet After ‘Categorical’ Denials
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“Where there is smoke, there’s fire.”
The Wall Street Journal rocked the real estate community last week Thursday with an exclusive report that Compass is in “advanced talks” to acquire HomeServices of America, Berkshire Hathaway’s prized residential real estate gem.
This is a report that HomeServices of America “categorically” denies.
But then Inman chimed in:
Rumors of the deal spread rapidly this week, with multiple sources telling Inman it was imminent. Inman staffers spent much of Wednesday and Thursday reaching out to various individuals who privately discussed the deal, but declined to go on the record.
Yahoo Finance backed into the news and published a terribly confusing story Monday, saying Warren Buffett plans to sell his real estate brokerage, “But It’s ‘Not… A Bet Against US Home Prices,’ Says Analyst As Fed Expects To Keep Rates Unchanged.”
And then at yesterday’s Monday morning office meeting, Allie Beth Allman herself, who sold her namesake company to Berkshire Hathaway, showed up to calm the troops.
What is going on?
Circle the Wagons
Well, the industry is in turmoil, thanks to a lawsuit that made a handful of lawyers very wealthy, overpayment on the settlement of said lawsuit, and 7% interest rates that created the worst year in real estate sales since 1995 — last year, 2024. Dave Perry-Miller had a saying: “When the going gets tough out there, you circle the wagons.” So we see this as a possible attempt to do just that: consolidate and fight on a united front.
For the uninitiated, Warren Buffett’s real estate brokerage is Berkshire Hathaway, a publicly traded conglomerate that owns 46 diverse companies including HomeServices of America. But HomeServices isn’t a brokerage firm like Compass or Redfin; it’s a holding company for a network of small brokerages, title companies, mortgage firms, and insurance services. That includes Ebby Halliday Realtors, which the company acquired in 2018. You may recall that the late, great Ebby Halliday once serenaded Buffett on her ukelele. And he wished her happy birthday on her 100th. HomeServices also posted a $107 million loss last year, mostly from the $250 million paid to settle Sitzer-Burnett.
HomeServices is emphatically denying this, saying “There is no agreement in place.” (That could be construed as, there has been talk but the check isn’t big enough?)
Ebby Halliday’s Chris Kelly, Executive Vice President – HomeServices of America, told agents by email last week, “We categorically deny that HomeServices of America has been sold to Compass or that there is any agreement in place to do so.”
And he has done so to us, personally: “Not happening.”
To be sure, there has been a lot of wagon-circling as of late: Compass continues to close in on brokerages across the country, most of them high-end, and has been for years.
In December, Compass announced it would acquire @properties and Christie’s International Real Estate plus its affiliated title and mortgage businesses, Proper Title and Proper Rate, in an estimated $444 million transaction. Compass, already the nation’s largest residential real estate brokerage by sales volume, expanded its portfolio last year with acquisitions in Tennessee and Louisiana.
Reffkin himself told me back in 2018 that the industry needs consolidation.
“The industry actually works,” he told me. “But it is overwhelmingly fragmented: 800 MLSs, 10,000 brokerages, 300 or more software products.”
Private equity firm Stone Point Capital acquired a major stake in Keller Williams. After that, Redfin sold to Rocket Companies (mortgage etc). While that could definitely be seen as Circle/Wagon, there are other subtleties. Redfin/Rocket united two technology-savvy companies to streamline the home buying process digitally and bolster Rocket’s AI models. Redfin founder Glenn Kelman says the two will create a technology company on a national scale with a lender, brokerage, title company, and home-search all in one:
“We want a customer to be able to check her phone to find out what she can afford, see which homes are just right for her, schedule a tour with a local, expert Redfin agent, and get pre-qualified for a loan, all in a matter of minutes. Varun [Varun Krishna | CEO of Rocket Companies] and I see how much better real estate could be when AI guides customers not just through that first step in their search, but all the way home, through the sale, the loan and then a lifetime of accumulating equity and wealth.”
The Keller Williams/Stone Point Capital deal seemed to be more about the infusion of capital into the 42-year-old Austin-based franchise brokerage (with 1,000 offices worldwide) to expand and thrive post-Sitzer-Burnett. Recall Keller settled the case for $70 million. Stone Point owns a variety of financial services firms, the most notable being CoreLogic. A big name, CoreLogic is a global provider of property information, analytics, and data-enabled solutions on properties, property characteristics, ownership, and market trends. The company sells the data to investors, government agencies, the insurance industry, mortgage firms, as well as Realtors and local MLS services. A spokesperson highlighted the synergies of the sale which keeps Gary Keller as executive chairman:
“With a strong track record of fostering successful partnerships and driving growth, Stone Point brings strategic capital that can be meaningfully deployed to power agent sales growth and market center development through investments in education, data, and technology,” the spokesperson added.
Local agents speaking on condition of anonymity are concerned. Where there is smoke, there’s fire, they are saying. The Wall Street Journal would not print a falsehood, said several, and there has been no retraction. Another said it made him sick to his stomach “but that’s what happens when you sell your company.” Some say agents would leave in droves, or try to find buyers for firms. Others think this could be a ruse, that perhaps Reffkin reached out to Berkshire Hathaway suggesting a partnership, then maybe spread the rumors himself to spark interest. Others wonder how the Justice Department would let such a merger stand: In 2023, Compass was the biggest U.S. brokerage by volume; HomeServices was the fourth-biggest, according to RealTrends. The merger would certainly create a giant. And it would increase Compass market value over its current $5 billion. The political climate may also be more favorable than in years past, with President Trump a fan of looser regulations and Mergers & Acquisitions in general. M&A deals are expected to surge this year.
Tell us what you think, and what you have heard: this could well be one of the largest developments in real estate history. But Victor Lund, a partner with Wav Group, one of the nation’s largest business consultants for brokerages and MLS services, including Ebby, is not so sure…
“Berkshire Hathaway has enough money to buy Compass with a stroke of a check and they wouldn’t even notice,” said Victor Lund, partner with Wav Group. “If [Berkshire Hathaway Energy] is committed to the business, they would buy Compass and take them private.”
This story is continuing and will be updated.
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Great take on the potential acquisition of BHHS by acquiring Compass. One thing I would stress though, there are several arms to the BHHS business model.
Homeservices of Americe (HSA) – these are their corporate owned brokerages. They are brokerages that they themselves acquired outright. Some of them were former BHHS Affiliates and now just run as BHHS (NY and New England Properties comes to mind)
Homeservices of America also has their other brokerages like Ebby Halliday and Paterson Schwartz. They are owned by BHHS but are not affiliates.
They have their affiliate network – A group of Franchisees from around the country that pay a royalty fee to BHHS.
They have their title, mortgage and other ancillary service business.
It’s important to note, they have only been in the residential real estate brokerage space since 2012-2013 after Brookfield acquired Prudential Real Estate, had BHHS take a 46% stake in the company then flipped the entire entity to BHHS.