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Agencies & People

Purplebricks to be quizzed by US competition watchdog over its flat-fee business model

Eric Eckhardt will tomorrow submit to Federal Trade Commission attorneys about competition and online 'disrupters' within the US real estate market.

Nigel Lewis

 

Purplebricks in the US is to be quizzed tomorrow about its business model and service by a joint meeting of the country’s Department of Justice and Federal Trade Commission.

As in the UK, in the US both state and national watchdogs take a keen interest in how the country’s real estate industry works and, in particular, how to keep it competitive and prevent agents colluding formally and informally to fix local commission rates.

But unlike the UK, states require agents/brokers to be licenced and trained before they can act on behalf of buyers or sellers.

During a packed day of panels sessions, Purplebricks CEO Eric Eckhardt is to be quizzed by government attorneys about the company’s business model in the US, his views on commission rates, the role of the country’s Multi Listing Service and his company’s role in promoting flat-fee rather than percentage-based commissions.

Commission rates

So far Purplebricks operates in several of the US’s biggest markets; New York, San Diego and Los Angeles, where it charges vendors a flat-fee of £3,200 to sell their homes.

In general vendors in the US expect to sell their properties for between 5% and 6% of the final selling price which for example in pricey Los Angeles means a selling fee of approximately £30,000. This is then split between the buyer’s and seller’s agents.

But such a juicy fee structure is now coming under scrutiny and facing competition.

The advent of Rightmove-like portal Zillow has begun to eat away at the need for buying agents, and this has given Purplebricks an opportunity – as its LPEs are effectively selling agents – and a platform to market its service through.

Eckhardt is to be quizzed alongside representatives from several other digital beasts within the US including Realtor.com, the consumer-facing portal of its main US trade association. as well as Zillow and national brokerage Redfin, which is Purplebricks’ nearest rival online.

June 4, 2018

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