British company Purplebricks is seeking to disrupt the Australian real estate market by veering away from the traditional model of a real estate agency and operating at a low-cost level.
“You mention the word real estate agents and everyone has a smile on their face and an inner feeling of unhappiness,” said former lawyer Michael Bruce, who joined forces with his estate agent brother, Kenny, to launch Purplebricks. “Ultimately, the problem with the industry, whether that is in the UK or anywhere in the world, is not the people but the model, which requires you to get a property at all costs.”
Instead of selling a property with a percentage of the sale price as commission, Purplebricks charges a fixed fee to sell a property. It charges either £798 in Britain or £1158 in London, regardless of the value of the property. Though Purplebricks has not yet revealed how much it intends to charge to Australian clients, the fee is likely to be similar.
According to CoreLogic, the median price of a home in Australia is about $580,000. When it is time to sell, homeowners can expect to pay about $11,600 in commission to a real estate agent, depending on the agent, the area, and the value of the property. With Purplebricks, however, the mortgage broker who takes all the risks is not getting ripped off by real estate agents who have been getting a “pay rise” because of the surge in property values.
Though launched only two years ago, Purplebricks is now the third biggest estate agent in the UK, with a total market share of about five per cent.
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