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"Purplebricks' success in the US is not assured" says top analyst

A leading digital analyst says Purplebricks’ success in the US market is not assured and has expressed concern over whether it is the right fit for some of the locations in which it has launched in the States.

Purplebricks’ long-term viability is under scrutiny now in the UK, with trading figures scheduled to be released next week and the online sector still reeling from the collapse of Emoov.

Mike DelPrete - former head of strategy at the property portal Trade Me in New Zealand and now a respected international real estate consultant - says on his analysis of Purplebricks’ full year figures in the summer, he estimated it had spent around $21,000 per listing.

Now DelPrete has now looked particularly at Purplebricks’ activities in Pheonix where, he says, the agency had a slow start when it launched in June. 

He says it is averaging “a few dozen” new listings per month. “With a listing fee of $3,600, that's around $75,000 in revenue for November.

He notes: “Purplebricks is also struggling to recruit and retain brokers in Phoenix. Agent numbers are stagnant, and the average number of listings per broker is two. If we assume a broker is paid $1,000 of the $3,600 listing fee, that's a very low effective annual pay package.”

However, he still believes that Phoenix is the right market for Purplebricks and is possibly better suited than some other US locations in which the agency operates. He insists that the housing market and demographics for Phoenix make it “the sweet spot for the fixed-fee proposition.”

But he cautions that Purplebricks is just one of a number of new disruptive forces in the US residential real estate market, 

“After five months in Phoenix, 75 total listings is a comparative drop in the bucket. If Purplebricks wants to make a dent in the US, these numbers need to be in the hundreds and thousands” says DelPrete, adding that there agency’s success Stateside is not guaranteed.

“Raising a lot of money doesn't guarantee success. And an organic pathway to growth takes large amounts of time, patience, and capital. Execution of this model is very much market-specific, and a lot of hard work. The business model scales linearly with people; technology is just an enabler” he insists.

  • Steve James

    In the USA the biggest problem Purplebricks has is that a lot of realtors don't work full time and these guys and girls make a hefty commission check from one sale. The average commission is say 5% and the realtor on average walks away with 65% of the total with the broker getting the remainder. So take a 200k sale the realtor gets 6500 when they sit down with the title clerk on closing. They sell one or two a month happy days. With Purplebricks they have to work full time for less than half that and like in the UK the LPEs are expected to field most of the customer questions, even the CPT will take a call and threeway call the LPEs as they don't know what the heck they are doing. In addition and this is looming they haven't been sued yet in the USA and they will. Another massive part of American business is customer service, they are the masters at this but Purplebricks seriously lacks it. Michael Bruce has said some pretty brutal things about the UK & US real estate markets and he's taken on a lot of powerful people with very deep pockets. His attitude in business is "it's better to ask for forgiveness rather than permission"

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