Technology and a real estate market that is becoming more competitive each day new products could mean savings for seller and buyers alike and chance the way real estate agents approach their business.
Over the years, agents have toiled under the general rule of a 6 percent commission. However, new offerings have been changing that narrative and we’ve seen 2 percent and 1 percent offers from new brokerages, and now, just a flat fee.
A recent CNBC report detailed a newcomer to the real estate fray – London-based Purplebricks, which is barely three years old, and launched its new U.S. business in Los Angeles earlier this month after raising $60 million in special stock offering.
The company offers the services of a regular real estate brokerage for a flat fee of $3,200. Services include professional photography, 3-D virtual tours, help with staging, home tours and listings on all the major online platforms.
In another twist to the traditional arrangement, buyers who choose Purplebricks as their agent will receive a $1,000 rebate on closing. Eric Eckardt, Purplebricks’ U.S. CEO, told CNBC he believes that while the model is new to the U.S., it has been proven in the U.K.
“When they launched in the U.K., they weren’t the first flat-fee model, but the way they approached the market, with a full hybrid offering, with the customer service from listing to closing, with a local real estate professional to provide all the services associated with that—it has really been a competitive differentiator.”
However, Purplebricks isn’t alone in the flat-fee segment. Reali recently launched in San Francisco with a similar deal but a higher fee of m $4,950, likely because of San Francisco’s higher median home price. Amit Haller, CEO of Reali, said the differentiation the company makes is not just its agents or fees.
“We created significant technology and a strong efficiency of our agents. That’s what allows us to reduce costs so significantly at the consumer level.”
For real estate agents, the model could prove to be attractive because they no longer have to negotiate commissions and haggle with other agents. Eckardt also pointed out that Purplebricks is also offering agents exclusive territories.
“They will be independent contractors. We are the only real estate firm we’re aware of in U.S. that will offer a model where if you work with Purplebricks we’re going to assign you a group of territories defined by ZIP codes that no one in our office can compete with, so as an agent you own that market.”