Discount brokerage Purplebricks slapped on wrist for misleading ads

Flat-fee firm to pay $16K, change wording of ads in Australia

Purplebricks, the rapidly-growing flat-fee brokerage, has been slapped on the wrist by an Australian consumer agency over misleading advertising that promises “low, fixed fees.”

The U.K.-based company, which launched in the U.S. six months ago, was fined nearly $16,000 for ads deemed to be misleading to consumers. The Queensland Office of Fair Trading said the ads duped consumers who were charged to post listings even if their property didn’t sell. In the U.S., Purplebricks charges sellers a nonrefundable, upfront fee of $3,200.

The ads — with the theme “save yourself from commisery” — are a play on “commissions” and “misery.” Purplebricks was also fined in the U.K. after boasting of “fees saved.”

In response to the Australian fines, the company has adjusted the wording of its ads in a “small segment” of the market, the company said.

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Purplebricks has avoided similar troubles in the U.S., where its ads say “save yourself from real misery.” (The wording is different because Purplebricks cannot eliminate the buyers’ agent commission like it can in the U.K. and Australia, where transactions only include a sell-side broker fee.)

“We can’t use that word over here because it sets up the idea in people’s minds that there’s no commission at all,” Jonathan Adler, the company’s U.S. chief marketing officer, told Inman. “It’s a different business model in the U.S. and we have to be really, really careful.”

Perhaps a bigger issue than the misleading ads, however, is that a study by research firm Jeffries said Purplebricks only sold 50 percent of the homes it listed — not the 78 percent it advertised. Purplebricks denied the claim.

Purplebricks opened a Los Angeles office last year after raising $60 million from investors. [Inman] — E.B. Solomont