Flat-fee brokerage Purplebricks is changing its business model significantly in the United States to offer varying listing fees to homesellers by region, which it will now only charge if and when a home is successfully sold, the company confirmed Monday.
The change, which launches Tuesday, brings Purplebricks U.S. closer in line with more traditional models of the industry — its agents will only get paid when a deal closes, as opposed to the previous model when sellers paid the brokerage an upfront fee regardless of the outcome of their listing — and further away from the disruptive model it uses in the U.K., its home country.
Purplebricks came to the United States in the autumn of 2017 with the promise of a low, flat-rate listing fee and has quickly expanded to a number of new markets. In the U.S., the company’s previous universal fee for sellers was $3,600 (raised from an initial $3,200).
In Australia, the company has raised its fees and started charging sellers half the fee upfront and half when it closes. In the U.K., the fee is still charged upfront.
“These changes have been informed by customer and agent feedback and are designed to drive increased market penetration and support continued growth,” Eric Eckardt, the U.S. CEO of Purplebricks, said in a statement.
“These changes further strengthen Purplebricks’ differentiated customer and agent value propositions, reflecting the natural evolution of our offering as we continue to scale in the U.S.,” Eckardt added. “As a result, our customers enjoy even greater peace of mind while still paying well below the national average commission of 5 to 6 percent, and our agents benefit from more flexibility to build their businesses.”
The range of fee prices was not immediately available, but starting Tuesday, January 22, prospective sellers will be able to input their ZIP codes into a fee finder on the company’s website. Inman actually saw the new fee finder live on Purplebricks’ website as of the posting of this article, and found flat-fees that varied radically, from $3,600 in New York City to $5,950 in Los Angeles.
In the company’s most recent earnings report, Purplebricks boasted of 140 sales consultants and real estate experts across seven states. It also reported that it was on track to meet revenue goals, but declined to actually reveal how much revenue it had earned in the third quarter of 2018.
The company, which is based in the U.K. and publicly traded there, and has operations in the U.S., Australia and recently expanded to Canada, said it was on track to meet full-year guidance of revenue between £165m and £185m, or between $216 million and $242 million.
Mike DelPrete, a strategic adviser in real estate tech, occasional Inman contributor and a scholar-in-residence at the University of Colorado Boulder, said the pivot is not surprising given the muted traction Purplebricks has had in the U.S. since launching in Los Angeles in September 2017.
“They came to the U.S., they started from scratch, they’re spending a lot of money — like a huge amount of money — to get this and the traction they’re getting off that… it’s not taken off like a rocket ship,” DelPrete told Inman.
DelPrete also pointed out that it’s a pivot that brings them closer to a traditional real estate model, where the agents aren’t getting paid until a deal is closed.
“So it’s totally on par with traditional agents, but if anything is true about Purplebricks, it’s not a traditional agency,” DelPrete said. “It’s interesting because you’re taking this really big overseas disruptor — their business in the U.K. has been built from the ground up to be radically different from the status quo — but it’s interesting seeing them come over here to the U.S. and they slowly pivot back to the status quo here.”
The changes may make things more difficult for agents, as well, according to DelPrete. Unlike at Redfin, another low-fee rival with a massive industry footprint, Purplebricks’ agents aren’t employees, so they’ll have to work to earn their commission like traditional agents. Purplebricks agents may end up spending a lot of time working with somebody who isn’t as serious about selling their home.
“When they get paid upfront in the U.K., they know that everyone is serious,” DelPrete said. “If you pay them £1,000 you know the seller is committed and they want to get their house sold. In this case, if you’re not paying up front, you might not be serious, you might not price your house appropriately to sell, you can just kind of test the waters.”