U.K. hybrid brokerage Purplebricks charges consumers a set fee to “instruct to sell” — for us Yanks, that means list a home with an agent. The company has expanded to Australia, and now it’s raising funds to bring its tech-based model to the U.S. in the second half of 2017.

  • Purplebricks needs to consider how American customers will respond to its fee system, especially if it holds onto its "no refunds for no sale" policy.
  • Agents will need clear explanations on payment, plus incentives to perform.
  • Purplebricks needs to establish itself slowly to overcome the idiosyncrasies of U.S. real estate, especially fragmented MLS.

U.K. hybrid brokerage Purplebricks charges consumers a set fee to “instruct to sell” — for us Yanks, that means list a home with an agent.

The company has expanded to Australia, and now it’s raising funds to bring its tech-based model to the U.S. in the second half of 2017.

As in the U.K., some brokerages and agents see technology models and flat-fee listings as a disruptor to the industry, while these models (like mine) believe in the ease and savings that consumers enjoy.

It’s not easy bringing a real estate model to another country because everyone does things differently. I’m curious to see how Purplebricks will deal with America’s real estate idiosyncrasies and fragmentation in its state-by-state rollout.

It will be a personnel, systems and technological challenge. Friends across the pond, this is what you need to know.

Understand the American agent mindset

Real estate agents in America are an independent lot. They value being 1099 contractors, so they can be a business of their own, keep their tax write-offs and change brokerages at will.

Getting agents to come onboard at a flat-fee model can more difficult since they’re sacrificing the listing commission (although they can still get the buyer’s commission, if applicable).

Purplebricks will need to be competitive with how much of their as-yet-undisclosed listing fee goes to the agent, plus the splits on buyer commissions, if they want to attract and keep good agents.

It will also have to be careful about advertising a “salary,” which it does in the U.K. (agents are technically self-employed, but the verbiage is confusing).

It’ll have to be able to recruit with real numbers that prove volume sales can make agents more money.

Don’t bite the hand

In the U.K., there are a plethora of professional real estate associations.

Purplebricks was wise to join the ever-growing group Propertymark, a unified front of Britain’s five biggest: Association of Residential Letting Agents (ARLA), National Association of Estate Agents (NAEA), National Associations of Valuers and Auctioneers (NAVA), Association of Property Inventory Providers (APIP) and the Institute of Commercial and Business Agents (ICBA).

Of the over 2 million licensed agents in the U.S., over 1.2 million are dues-paying members of the National Association of Realtors (NAR).

At about $120 per agent, NAR has a ton of money and influence. As of the end of 2016, NAR was the second-highest spender of influence in Washington.

For a proper start in the U.S., Purplebricks will need to play nice with NAR and understand its mandate to conform to the Real Estate Standards Organization (RESO) Data Dictionary and Web API.

Don’t get confused with mom-and-pop

There are a ton of flat-fee models in the U.S. Most of them struggle to do it right.

With limited bandwidth, some small independent shops can’t afford the tech interface and systems to make volume sales work without sacrificing service.

Purplebricks has a good interface and a pleasing persona, and that’s a great place to start. It takes time to earn trust, however; so the company is wise to do a state-by-state rollout.

Value customer service

Purplebricks makes the listing agent’s job simple with a team to do most of the tedious work like marketing and paperwork.

Where it may struggle is in the policy of paying agents upfront once the listing contract is signed.

This de-incentivizes agents to provide superior service, since they get paid no matter what. While the experience reviews on Purplebricks’ site via TrustPilot show a five-star average for over 15,000 reviews, the company has been questioned about the disparity of low marks on other sites and its decision to disable Facebook reviews.

U.S. homesellers expect great service from listing agreement to the closing table.

The agent and the company need to be proactive about keeping the customer informed through an easy-to-use interface, calls, texts and push notifications.

Purplebricks does have a customer portal in place for transaction tracking, but it needs to understand that customers still want personal interaction and timely answers to their questions.

Be upfront about fees

Purplebricks has struggled in the U.K. with claims of misleading advertising.

The brokerage needs to be upfront about whatever fee it sets, especially if it holds onto its current policy of charging the entire fee upfront with no refund if the house doesn’t sell.

In the U.K., there are added costs in addition to the advertised fee; I’m not sure how that will play out in the U.S.

Prepare for the MLS debacle

In the U.K. and Australia, Purplebricks enjoys a unified multiple listing service (there, MLS stands for multi listing service).

Here, it’s not so easy. Internet Data Exchange (IDX) technology makes it possible to integrate and view home listings anywhere, but actually putting up a listing is another matter thanks to a very fragmented infrastructure and no standard listing form.

To list a home, it must be uploaded via the local MLS (there are over 750 or so across the country), so Purplebricks needs agent access to that particular entity.

It’s a frustrating system that stymies forward progress in technology, and it’s a good reason why Purplebricks has to start in one state.

The U.S. real estate market is ready for consumer-centric change, and technology platforms are a strong contender to make it happen industry-wide.

Purplebricks will bring its tech savvy and cheeky charm to the experience, but the key will be to effectively adapt its model to the American agent and consumer.

Chris Rediger is the co-founder and president of Redefy Real Estate. Learn more about Chris and Redefy on Twitter or Facebook.

Email Chris Rediger.

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