The recent sale of two prominent real-estate brokerage firms in the D.C. region is part of a wave of consolidation that is taking hold across the nation, as Internet upstarts and new technology shake up the industry.
Within the span of one week, longtime local powerhouse Long & Foster was acquired on Sept. 7. by HomeServices of America, an affiliate of Berkshire Hathaway, the conglomerate headed by billionaire investor Warren Buffett. Five days later, Long & Foster bought Evers & Co. Terms of the deals were not disclosed.
Those back-to-back sales followed other recent deals elsewhere in the country. Within the past six weeks, HomeServices acquired a North Carolina brokerage firm, and New York giant Douglas Elliman Real Estate purchased Beverly Hills-based Teles Properties.
“HomeServices has been on a mission over the last 20 years of acquiring great companies large and small in key markets around the country, aggregating the companies and creating scale and synergies,” said Ron Peltier, chairman and chief executive of HomeServices. “The industry is very fragmented, and with the costs of business continuing to rise, having scale is critical.”
Buffett, in a note to investors this year, said HomeServices is likely to continue to be on the hunt for more realty companies and opportunities to franchise.
“We like both aspects of the real estate business and expect to acquire many Realtors and franchisees during the next decade,” Buffett wrote.
HomeServices counts more than 41,000 real estate professionals working in 30 states and the District of Columbia.
“I’ll wager you right now, within the next six to 12 months, you will see Long & Foster and HomeServices do 10 or 12 more transactions like that,” said Steve Murray, president of the consulting firm Real Trends, which represented Long & Foster in its deal with HomeServices. “The fact that Wes Foster considered doing this has caused many of his peers to reconsider whether they should stay private or themselves seek a buyer.”
Long & Foster was founded in 1968 by Wes Foster and Henry Long. (Foster bought out Long in 1979.) It became one of the biggest residential real estate companies in the country by sales volume. Last year, Long & Foster had nearly $29 billion in sales and sold more than 81,000 homes. It also was one of the largest privately held companies in the Washington region, with approximately 11,000 agents in more than 230 offices serving home buyers in the District, Maryland, Virginia, West Virginia, North Carolina, Pennsylvania, Delaware and New Jersey. Long & Foster will continue to operate under its brand and maintain relationships with partners such as Christie’s International Real Estate.
Donna Evers founded Evers & Co. in 1985 and grew it to a three-office brokerage firm with nearly 100 agents in the District, Maryland and Virginia. She will continue to oversee the three offices after the sale but the Evers & Co. brand will be discontinued in the fall.
“You say sell but it’s really more of an affiliation and a partnership,” Evers said. “We want to grow and prosper and I think this is a good way to do it.”
In both cases, the companies followed hyperlocal strategies to build their businesses. In an industry built on personal relationships and local expertise, their real estate agents didn’t just know about cities and towns. They also knew neighborhoods and blocks.
“We always have, first and foremost in our minds, how do we serve our clients best?” Evers said.
Yet home buyers are increasing relying on a host of new Internet services to find properties and assess a market, reducing their dependence on brokers. As technology costs mount, small and privately owned brokerage firms have found it difficult to remain competitive against online companies such as Redfin.
Plus, back-office functions such as marketing, advertising and statistical analysis cost money. It can be more cost-effective to merge with a bigger entity to spread out those costs.
What makes Long & Foster attractive to HomeServices and Evers & Co. appealing to Long & Foster is the market savvy they bring.
With the acquisition of Long & Foster, HomeServices quickly establishes a foothold in the lucrative D.C. housing market.
“I think it’s a win-win for all of us,” Evers said.
The timing of the sales of Long & Foster to HomeServices and Evers & Co. to Long & Foster led some to speculate they were related. However, according to those involved in both deals, the sales weren’t intertwined but separate.
“I know it sounds like it was some great, grand plan, but it wasn’t,” Evers said.
Murray added that Long & Foster had been working on a deal for Evers & Co. for six or eight months but put it off until after its deal with HomeServices was complete.