Purplebricks parachutes into NYC disavowing broker fees
Robert DiBiase will lead New York push
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.