Purplebricks parachutes into NYC disavowing broker fees

Robert DiBiase will lead New York push

TRD New York /
Apr.April 03, 2018 11:15 AM

UPDATED, 12:50 p.m., April 3: The discount residential brokerage Purplebricks is launching in New York today with a simple message: In 2018, why are consumers still paying a 6 percent fee to sell their home?

“Our view is that in 2018 no one should be paying 5, 6 or 7 percent to sell their home, given the changing consumer behavior and access to information and viable alternatives,” said Eric Eckardt, the company’s U.S. CEO.

“Look at other verticals today. If you’re going on vacation, you’re not going to a travel agent. You’re going online,” he said during a phone interview. “Our model is aligned to meet the consumers’ changing behavior.”

The U.K.-based company, which charges sellers in the U.S. a flat $3,200 fee, has been growing fast. After launching in 2014, the firm has operations in the U.K. and Australia, and it opened a Los Angeles office last year after raising $60 million from investors.

The publicly-traded company has a market cap of around $1 billion — compared to just $342 million in 2015.

Purplebricks moved up its New York launch last month after German media giant Axel Springer made a $177 million equity investment in the firm.

The company said it will spend $71 million of that money on its U.S. expansion, where it will use a big chunk of the recent investment on advertising.

“In the U.S., the economics is what intrigues consumers out of the gate,” Eckardt said. “Once they learn about the proposition behind it — that it’s a full-service offering — they’re compelled by that.”

Discount brokerages like Redfin and LG Fairmont — which recently cut back its commission fee — have tried to usurp the traditional powers like Corcoran Group and Douglas Elliman, but have yet to make much of a dent in Manhattan, where the median sales price in the first quarter was $1.08 million. On Jan. 2, Corcoran and Elliman combined to have about $9.4 billion in listings volume, according to an analysis by The Real Deal. But no discount brokerage made TRD’s ranking.

So far, Purplebricks has 13 employees who work out of a WeWork space on 36th Street in Midtown, and the company is actively hunting for permanent digs. “We’re going to add a number of positions across marketing, finance and operations to support the tristate market launch,” Eckardt said.

Purplebricks said Tuesday it tapped Robert DiBiase, of Halstead Property, to lead its nascent operation in New York. DiBiase was previously a managing director for the Brooklyn and Queens divisions of Massey Knakal Realty Services.

Purplebricks is also borrowing the Massey Knakal model of carving up geographic territories and assigning them to team leaders, who are known as “territory owners.” In the metro area, territories include the five boroughs, parts of Long Island, Westchester, the Hudson Valley and parts of New Jersey and Connecticut. (Compass, back when it was known as Urban Compass, also incorporated the territory system but later dropped it.)

Eckardt said territory owners go through an “extensive” interview with at least five Purplebricks executives. “We’re not just taking on agents to build our inventory count,” he said. “We invest in them to build their territories. So it’s important we have the right operator.”

Discount firms like Purplebricks have wind at their backs following Redfin’s successful IPO last summer. The Seattle-based company had revenue of $370 million in 2017, but lost $15 million for the full year.

Purplebricks, however, has taken heat for misleading ads in Australia and the U.K. The investment bank Jeffries also issued a report that said Purplebricks’ sales figures were inflated, which sent the company’s share price tumbling 20 percent. Purplebricks has said Jeffries’ research was wrong and did not account for closings that were still being processed by the U.K. government.

Eckardt declined to share Purplebricks’ sales volume in California, but said the company is seeing month-over-month increases largely because of demand for alternative brokerage models. Sellers who sign on with Purplebricks get professional photos, 3D virtual tours of their property and work with a professional agent. Purplebricks’ platform also notifies sellers immediately if a buyer makes an offer or wants to schedule a showing.

Eckardt said in L.A., Purplebricks is marketing homes listed for a few hundred thousand dollars to “several million.”

“Our proposition will hopefully resonate across all segments of the market,” he said.

Correction: A previous version of this story incorrectly stated the year Purplebricks launched. It was 2014. 


Related Articles

arrow_forward_ios
(Images courtesy of Victor Group)

The Getty condo chops prices up to 53%

The Getty condo chops prices up to 53%
442 Union Street and 257 Berry Street (Google Maps)

Brooklyn’s luxury market reaches new pandemic high

Brooklyn’s luxury market reaches new pandemic high
Marwan Kheireddine (inset), Jennifer Lawrence and 400 East 67th Street (Getty, Compass, BDL Accelerate)

Jennifer Lawrence’s Upper East Side PH sold at 37% loss

Jennifer Lawrence’s Upper East Side PH sold at 37% loss
Senate Minority Leader Chuck Schumer and Senate Majority Leader Mitch McConnell (Schumer by Tasos Katopodis/Getty Images; McConnell by Ting Shen/Xinhua via Getty)

Schumer v. McConnell on SALT: Who’s gonna give?

Schumer v. McConnell on SALT: Who’s gonna give?
111 Leroy Street and 817 Fifth Avenue (StreetEasy, Google Maps)

Luxury deals plummet in Manhattan — again

Luxury deals plummet in Manhattan — again
From left: Jared Kushner, 715 Park Avenue, Deutsche Bank CEO Christian Sewing, and Rosemary Vrablic (Credits: Kushner by BRENDAN SMIALOWSKI/AFP via Getty Images; 715 Park via Google Maps; Sewing by by Thomas Lohnes/Getty Images; Vrablic by PAUL LAURIE/Patrick McMullan via Getty Images)

Apartment sale to banker for Trump and Kushner probed

Apartment sale to banker for Trump and Kushner probed
Renderings of 17 Jane Street and Edward J. Minskoff (Renderings via Kristen Krajewski; Minksoff by Patrick McMullan/Patrick McMullan via Getty Images)

Minskoff sells first condo in West Village project for $22M

Minskoff sells first condo in West Village project for $22M
Central Park South saw its median sales price for condos nosedive to $1.5 million (iStock, photo by Gary Hershorn/Getty Images)

Here’s where Covid hit Manhattan condo market hardest

Here’s where Covid hit Manhattan condo market hardest
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...