U.K. hybrid brokerage Purplebricks launched in the Los Angeles area today, marking its official U.S. debut. The renegade’s expansion from across the pond draws on more than $60 million raised in a special stock offering.

U.K. hybrid brokerage Purplebricks launched in the Los Angeles area today, marking its official U.S. debut. The renegade’s expansion from across the pond draws on more than $60 million raised in a special stock offering.

Purplebricks will begin its run in the Golden State by diagnosing Californians with “real misery,” a condition for those who think they overpaid their real estate agent. Though not yet listed in the DSM-5, the disease is the theme of the brokerage’s latest marketing push.

After introducing its business model to California, the company, which is traded on the London Stock Exchange, plans to invade other big states with the low-fee formula that shook up the U.K.’s real estate market.

While Americans have shrugged at such offerings in the past, Purplebricks believes its blend of self-service tools and agent support will find purchase here.

‘Brilliant agents’ need not fear

Michael Bruce

“We’re embracing real estate agents but in a new world in a different way and those that are brilliant agents will have nothing to fear,” said Purplebricks CEO Michael Bruce.

Real estate is one of the only industries where fees remain “highly overinflated” and Purplebricks’ mission is to “offer a fair alternative,” he said.

Purplebricks will charge a listing fee of $3,200, plus the typical compensation paid to buyer’s brokers (often between 2 and 3 percent). Sellers must pay the fee either upfront or at closing, regardless of whether their home sells.

They will receive a multiple listing service (MLS) listing, a lock-box and for-sale sign, on-demand consulting from a Purplebricks real estate agent and Matterport-powered 3-D home tours.

They’ll also get access to a platform that they can use to approve showings, view showing feedback and communicate directly with prospective homebuyers or buyer’s agents — and even negotiate contracts with them.

Purplebricks will work with homebuyers as well, paying a $1,000 rebate out of the buy-side commission toward closing costs.

On Purplebricks’ website, buyers will be able to search MLS listings, schedule tours, message sellers — either directly or through a buyer’s agent — and submit offers.

Purplebricks’ ‘local real estate experts’

Purplebricks’ “local real estate experts” operate its platform and brand within exclusive territories determined by ZIP code.

They will pay commission splits to Purplebricks and have the option to build local teams. Purplebricks wouldn’t reveal its commission splits but said they are “highly competitive.”

The brokerage will provide leads and support to its agents, including a customer service team that can respond quickly to late-night inquiries from buyers and sellers.

That support, combined with a platform that encourages sellers to take on some tasks typically handled by agents, should allow agents to multiply their sales volume enough to more than offset their lower earnings per listing, said Eric Eckhardt, a real estate tech vet who is heading up Purplebricks’ U.S. operation.

Plus, sellers can still earn almost a full buy-side commission. Only the $1,000 rebate and Purplebricks’ commission split are deducted, he said.

“It has been estimated that upward of 80 percent of an agent’s time is spent prospecting for new business,” Purplebricks said in a statement. “At Purplebricks, our agents can focus their time doing what they love to do and what they do best: working with customers.”

Bruce says top U.K. real estate talent is migrating to Purplebricks because “we’re taking market share; we’re driving down the fees that people can charge, and therefore, they’re better off with us than someone else.”

Encouraging communication between buyer and seller

Purplebricks’ service model depends partly on handing more responsibility and control to homesellers, in some ways blending for-sale-by-owner (FSBO) tools with traditional brokerage service.

Sellers can use the technology platform to approve showings and view showing feedback. But perhaps most significantly, it allows sellers to communicate directly with prospective buyers or buyer’s agents, rather than through a listing agent.

“The way it will work is — in practice, seller and buyer will communicate or seller and buyer’s agent will communicate,” Bruce said.

While sellers can ask Purplebricks listing agents to negotiate on their behalf, Bruce anticipates that many homesellers will choose to handle negotiations themselves, perhaps with consultation from their listing agent.

Purplebricks facilitates “thousands of offers negotiated between buyers and sellers everyday … without the need for agent involvement,” he said.

Purplebricks is launching in the Los Angeles area with about 35 real estate experts.

It plans to expand “into other key U.S. states via a controlled roll-out strategy with a plan to accelerate coverage, as required,” the company previously said. Florida, Texas and New York are all on its radar.

Battles in Britain

After only four years in the business, Purplebricks claims to have grown to be the largest U.K. brokerage by its “new listing and sales run rate.” It also has made some inroads in Australia after launching there last year.

Purplebricks’ rapid growth and aggressive marketing has sparked pushback from conventional brokerages. Critics say the company sets homesellers to fail and makes dubious marketing claims.

A U.K. advertising regulator ordered Purplebricks to remove ads that touted “fees saved” comparisons between Purplebricks and traditional real estate agents because they allegedly mislead consumers.

‘Real misery’ is the new ‘commisery’

Purplebricks added the word “commisery” to the U.K. real estate lexicon by diagnosing the disease in commercials and then advising consumers to avoid the condition by working with Purplebricks.

It’s adapted the term to “real misery” for its U.S. marketing. That’s because, unlike in the U.K., Purplebricks will collect a buy-side commission here, so it didn’t want to equate commissions with misery.

Purplebricks defines “real misery” as “the misery you feel when you pay too much in commission and get nothing more for your money.”

“We don’t tend to look at our Twitter feed because it’s just vile,” Bruce said, when asked about how Purplebricks has coped with industry hostility so far.

He says he has a “hard helmet and big coat of armor” ready if Purplebricks comes under fire from the U.S. real estate establishment.

Email Teke Wiggin.

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