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Meet the Real Estate Franchise Backed by Warren Buffett

Meet the Real Estate Franchise Backed by Warren Buffett

For nearly 50 years, Warren Buffett has amassed an incredible portfolio, using his firm Berkshire Hathaway as a vehicle to buy and sell companies around the world. Despite watching the ups and downs of oil markets and tech stocks, the one thing he's always been bullish on is real estate, claiming that the best investment he ever made--besides his two wedding rings--was the $31,500 house he bought in 1958.

So it's no surprise that one of the first enterprises Buffett is allowing to use the Berkshire Hathaway brand name is a real-estate brokerage. "We want to be in the businesses that are going to be very enduring ... and real-estate brokerage operations--they will be here 100 years from now," he said when addressing HomeServices realtors last year.

The Berkshire Hathaway HomeServices franchise operates under HSF Affiliates, which owns the Prudential and Real Living real-estate networks and is a joint venture between HomeServices of America and Brookfield Asset Management.

Run by HSF CEO Earl Lee, Berkshire Hathaway HomeServices already encompasses nearly 23,000 agents and more than 600 offices, putting it among the five largest real-estate networks in the country, and Lee expects those numbers to grow as Prudential franchisees rebrand and the company acquires units and expands internationally.

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We caught up with Lee between showings to tell us the benefits of working under the Buffett brand.

You must be under a lot of pressure to uphold the Berkshire Hathaway legacy.

It clearly does add pressure, and the companies we have converted take this to heart. I attended the last Berkshire Hathaway shareholders meeting, and there were 33,000 people there. At Prudential, getting 1,000 people at a meeting was considered super big. There were shareholders from around the world, and there are about 330,000 employees that work for Berkshire Hathaway companies. This is personal for them; this is their company. It's really a large family of shareholders and employees.

Are you focused mainly on high-end real estate?
One thing about Berkshire Hathaway is that it's a very smart brand and appeals to all levels of the financial spectrum. Our marketing department did focus groups, and the younger group had a higher name awareness of Berkshire and Mr. Buffett, which will play well whether we're dealing with a starter home or multimillion-dollar mansion. We have a brand that can handle either one.

You're already one of the largest real-estate firms, and you just started. Do you aim to be the largest?
We really don't want to be the largest. It doesn't let you control the quality of your network. Where we rank in size has little to do with our corporate objectives. In real estate, it's the amount of business you do, not the number of offices you have.

You must have strict standards for franchisees.
I would say our vetting process is as thorough and arduous as any other real-estate franchise out there. Who we select as an affiliate is critically important. We've converted affiliates from other brands, and their response is, "Holy smokes. You guys are thorough." It's our obligation and duty to make sure who we affiliate with is worthy of the brand.

What do franchisees get if they sign up with you?
The first thing they get is one of the world's most respected brands. In a business as personal as real estate, having a brand that denotes confidence and straight talk is a big factor that affiliates are buying into. We've also built Berkshire up around the value proposition. They get cutting-edge technology and education. Wherever we have converted a company, when the yard signs and website go up, the reception by the public has been tremendous.

Real estate has changed a lot in the last decade. How have you adapted?
What has changed is the way realtors find and communicate with buyers, and the ways transactions are conducted through technology. But the business hasn't really changed. It's about trust. People want to work with someone they believe in. That's critically essential, and that's something branding helps with.

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