2004: Is the home brokerage model sustainable?
AUDIENCE MEMBER: Thanks, Warren, thanks. My question — my name is Chad Bliss (PH), Lincoln, Nebraska.
My question pertains to MidAmerican Energy and the Home Service division. You said earlier that you would continue buying, you know, companies in the real estate industry.
Given the growth in “for sale by owners,” discount brokers, also maybe even banks now, do you think the current business model of home services is sustainable, or do you think commissions need to be lowered?
WARREN BUFFETT: Yeah, I really do think it’s sustainable. It’s a good question. In fact, I forget where I saw the article a few weeks ago, maybe in the Sunday New York Times, about Barry Diller’s interest, I think through Lending Tree, on the internet.
And there’ve been a lot of real estate sales-related operations that have been on the internet. And the internet is a threat to any business, including real estate brokerage.
But, you know, when I think about the process of buying a home, and the degree of personal involvement involved in that, you know, the “for sale by owner.” They call them FSBOs in the business.
I remember talking with my friend, Chuck Peterson about that 50 years ago, and FSBOs were with us then, and FSBOs are with us now.
But my guess is that a very significant percentage of home transactions 30 years from now will be done through a pipeline, and through a distribution mechanism, or brokerage mechanism, like exists now.
I do not see it changing dramatically, although there are people that are going to try and change it dramatically. So you’ve got competitors. But I love the idea of expanding Home Services.
Charlie?
CHARLIE MUNGER: Well, you tried to change it once yourself dramatically, right here in Omaha, and you fell on your ass. (Laughter)
He tried to —
WARREN BUFFETT: His memory’s better than mine.
CHARLIE MUNGER: He tried to take away the — a good part of the home advertising business from the World-Herald to, you know, your then-little newspaper —
WARREN BUFFETT: Oh, right, it was very thin, yeah. (Laughs)
CHARLIE MUNGER: Yeah, yeah. And it didn’t work worth a damn.
WARREN BUFFETT: Yeah. (Laughter)
And that’s the last time I call on him. The — (Laughter)