Warren Buffett and Greg Abel, Berkshire Hathaway.
Illustration by Lanette Behiry/Real Estate News

Warren Buffett: Real estate is ‘fundamental’ 

The Berkshire Hathaway CEO, along with Vice Chair Greg Abel, spoke about the HomeServices settlement and more during the company's annual shareholder meeting.

May 6, 2024
3 minutes

Key points:

  • The industry will undoubtedly face changes, said Abel, but real estate agents remain "critical" to the homebuying process.
  • Abel helped spearhead the HomeServices deal, but noted that the obligation "resides with and can be met by HomeServices."
  • Buffett addressed agent commissions, saying "the system has really worked out very well."

Real estate agents will continue to play a pivotal role in the homebuying process despite the changes coming out of the commissions lawsuits, Berkshire Hathaway Vice Chairman Greg Abel said during the company's annual shareholder meeting on May 4.

Both Abel and Berkshire Hathaway Co-founder and Chairman Warren Buffett spoke at length on a variety of topics, including subsidiary HomeServices of America's recent settlement and the state of the real estate industry.

'Everyone was swept up' in lawsuits

The annual meeting coincided with a transitional time in the industry, as an increasing number of large brokerage companies have agreed to pay millions to settle commission lawsuits. HomeServices was the last defendant in the landmark Sitzer/Burnett case to settle, agreeing to pay a staggering $250 million — the largest amount of any brokerage involved in the lawsuits thus far.

Buffett said that while he was kept in the loop regarding the settlement, Abel was in charge of the deal.

"There's no question the industry will go through some changes because of that settlement," Abel said, referring to the deals reached by HomeServices and other brokerage firms as well as NAR's $418 million agreement, adding that "effectively everyone was swept up in that settlement."

He noted that the HomeServices of America settlement "resides with HomeServices and can be met by HomeServices, and that was an important condition," acknowledging that Berkshire Hathaway Energy was separately named as a defendant in the Gibson case in March and is not part of the $250 million deal.

An agent's 'guidance is critical'

But Abel emphasized that "the real estate agent is still an important part of these transactions" given their expertise and the size of the investment.

"It's the one time in our lives where we make these massive investments, and having that counsel and guidance is critical," Abel said.

Buffett was unfazed at the idea of commission fees, noting that he has "not negotiated down the commission," even on a multimillion-dollar sale. "I've looked at the figures, and I think the system has really worked out very well," he said.

Buffett added that he is encouraged by the expansion of the company's real estate arm despite the sweeping settlements. He said real estate is "fundamental" to the company's success.

Still, the challenges facing the industry seem to be weighing on Berkshire Hathaway's financial performance. In Q1 2024, the company posted a loss of $159 million from its real estate brokerage segment compared to a loss of $34 million a year before. This loss was driven primarily by "expense accruals" in connection with the HomeServices lawsuit, according to the company's earnings statement.

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