Top 100 Companies: California, Here We Come

Midwestern giant HomeServices takes growth strategy west.

July 1, 2002

The nation’s second largest residential real estate company has a new name and a new, major presence in the Golden State. And HomeServices of America Inc., formerly, is still on an expansion path, says President and CEO Ronald J. Peltier.

The company’s recently added tagline “A Berkshire Hathaway Affiliate” sends a strong message to potential merger partners that HomeServices is more than just a Midwestern power player:It’s a rising star in the galaxy of Berkshire Hathaway Inc. CEO Warren E. Buffett.

Berkshire holds interests in a diverse range of industries—from insurance to jewelry to premium candies. The common thread among the holdings, according to Peltier, is Buffett’s attraction to industries, like real estate services, that touch customers’ and clients’ emotions. “It’s great validation in an industry that sometimes lacks validation by the business world,”says Peltier. “What greater validation can you have than Warren Buffett, the premier financial and investment mind in the county, if not the world.”

Much like Berkshire, HomeServices employs a growth strategy of acquiring profitable companies but keeping their brand names and leadership intact. The Minneapolis-based HomeServices, now in its fourth year of operation, announced in March 2002 that it was acquiring a majority interest in Prudential California Realty, the largest privately owned and operated franchised real estate company in the country.

Says Pru California CEO Stephen Games, who retains a partial interest in the company: “My desire was to be part of an entrepreneurial company that has the capital to grow and prosper through good times and bad.”

Games, whose company is No. 6 on this year’s list, was also attracted to HomeServices’ management philosophy. “They believe as I do that those of us who built the companies would be best at managing them,” he says. The company plans to keep its Prudential affiliation.

Before the merger, HomeServices was sitting comfortably in the No. 2 slot on REALTORS® Magazine’s 2002 Top 100 Companies list. The company closed 106,740 residential transaction sides last year, a 22 percent increase over 2000 and a 25 percent lead over No. 3 Weichert, REALTORS®, of Morris Plains, N.J. The addition of Pru California—with more than 3,100 sales associates in 71 offices serving southern California—will mean a 35 percent spike in HomeServices’ transaction sides closed.

“We’d been looking in California for some time,” says Peltier. “You can hardly be considered a national player without being there.” His organization now includes 11 companies and is still on the lookout in major metropolitan areas for acquisitions that meet two important criteria: companies that are No. 1 or No. 2 in their market and whose key leaders are committed to staying in place for several years. Says Peltier: “We’re not necessarily the right company for owners who just want to exit their business.”

The HomeServices–Pru California deal illustrates the consolidation that’s happening at the top of the residential real estate food chain. Three Top 100 companies—Huff Realty (No. 77), Realty One (No. 13), and HER, REALTORS® (No. 33)—recently joined forces to form Real Living Inc. And five recent acquisitions by industry giant NRT Inc. have expanded the No. 1 company’s reach in five states and Washington, D.C.

NRT has approached HomeServices, too, says Peltier, “but our business models are totally different.”

Whatever their model, today’s megacompanies are all driving to give consumers the best one-stop-shopping experience possible. Indeed, most HomeServices companies offer the full menu of services—brokerage, mortgage, escrow, and title, property, and casualty insurance. What sets HomeServices apart, Peltier says, is its emphasis on professionally trained and knowledgeable salespeople and effective use of technology and bundled services.

With the healthy home appreciation in many markets, “we wind up getting a fairly hefty fee for our services,” says Peltier. “The challenge is to provide the consumer with a higher level of service and value. That’s something we all have plenty of opportunities to do every day.”

HomeServices of America Inc. Top 100 ranking: 2
Top officer Ron Peltier
2001 transaction sides closed 106,740
Percent change from 2000 22.14
2001 sales volume $18.38 billion
Percent change from 2000 28.85
Number of salespeople 8,724
Sides per salesperson 12
Sales volume per salesperson $2.1 million