A real estate brokerage providing fixed-fee real estate services, coming to Canada
Mario Toneguzzi
REM
Purplebricks, a real estate brokerage providing fixed-fee real estate services, is poised to expand its presence in the Canadian market despite some challenges it has faced with the concept in Australia and the United States.
Lukas Lhotsky, COO and general manager for Purplebricks Canada, says the company has a growing network of about 100 Realtors across Canada operating in Ontario, Manitoba and Alberta. There are plans to enter the market in British Columbia in the future.
Purplebricks officially launched its operations in Canada in January. The company acquired the DuProprio/ComFree Network from Yellow Pages Digital & Media Solutions Limited in June of last year.
“We’re pretty excited about what’s happening. I think that we’ve been growing very significantly since January,” says Lhotsky. “We moved into a much bigger new space (of about 10,000 square feet) in Hamilton, Ont. We’re growing in all of the markets we’re in. So, it’s exciting to see.
“We’re still a small part of what real estate represents. I think we’re modest enough to know we’re never going to be all of real estate. There’s always going to be room for a variety of different models but we think there’s a lot of opportunity to continue to grow and to continue to offer the service that a lot of Canadians are asking for in the markets where we operate. Our goal is just to continue to be more present, more signs on the ground.”
Lhotsky describes Purplebricks as a duly registered real estate brokerage that helps people buy and sell their home for a single fixed fee, offering the same expertise consumers would expect from traditional real estate.
The fixed fee varies a little bit by market but is generally about $799 – the cost of the core listing fee. If consumers want help with showings and negotiations, they can purchase those add-ons for a fixed fee as well.
The people who work with Purplebricks are licenced Realtors, who list the properties on the Purplebricks online network.
“They all work for us. They’re all Purplebricks Realtors,” says Lhotsky.
“We’ve had a lot of success so far and we think we can continue to make inroads. A lot of people – especially once they use the service – they say afterwards, ‘How come I didn’t always do this? It works’. That’s what gets us excited and where we think there’s more opportunity.”
Part of the company’s recent marketing effort has been a television advertising campaign to spread the word about what it does.
“It’s being seen in a lot of places. We’ve got a pretty significant media buy that covers sporting events. We were in some of the NHL playoffs. We were in a variety of other TV shows. We did a lot of buying of daytime television as well as some of the top shows in almost all markets,” says Lhotsky.
“The main message is incredibly simple. There are different ways that you can sell your home and you can sell your home for a fixed fee and save on commission. That’s the core message we’re trying to get across. You don’t have to compromise on getting access to real estate expertise and getting a very high level of service and you can still get that without necessarily paying the full commission that you might in a traditional brokerage context.”
Does the Purplebricks concept appeal more in a buyers’ or sellers’ market? Lhotsky says it’s an interesting question and he really doesn’t know. But he said the company has seen that it has been quite vibrant in both types of markets.
“Because we’ve got an offer and negotiation service, people feel really comfortable using us in very hot markets. They know we’ve got a very dedicated team that does nothing else but offers and negotiations. An individual on that team will literally do hundreds of those in a year,” he says.
“They literally do more in one year than most Realtors will do in a lifetime. So, in a hot market like Ottawa is right now, we’ve done very, very well. And in challenging markets… there are people that see the value because they are value conscious. There’s a lot of really smart people out there that are doing their homework and when they start to add it up they start to realize, ‘Okay, what am I really compromising? I know the market’s difficult but I’m going to get the same visibility. I’m going to get access to the same Realtor’s level of service if not more. And I can use that money right now’.”
Purplebricks’ parent company is based in London, England. It first expanded to North America in September 2017, operating in Los Angeles.
Internationally, the company has faced some recent challenges. Its founder and chief executive Michael Bruce left the company. It also reported that it was pulling out of Australia and placing its U.S. business under review.
In early May, the company posted a report on its website that said this about the Canadian, Australian and American markets:
“The Group’s Canadian business continues to perform well and trading is in line with management’s expectations. The Board has a strong belief in the future opportunities in this market.
“During the two and a half years that Purplebricks has been operating in Australia, market conditions have become increasingly challenging. This, combined with some execution errors, has resulted in the business not delivering the progress the Board expected. The Board has therefore concluded that the prospective returns from Australia are not sufficient to justify continued investment. Accordingly, the Group has chosen to exit the Australian market and the business there has been put into an orderly run down with immediate effect, pending closure. The business remains committed to our current customers.
“Whilst good progress has been made in launching our brand across the U.S., the Board has materially cut investment in marketing and other overheads to reduce expenditure to sustainable levels and begun a strategic review. As part of this review, management proposes to examine the options for delivering the next phase of growth in a more effective and cost-efficient way including more closely considering the opportunities and risks associated with a materially scaled-back U.S. business. A further announcement on this strategic review will be made in due course.”
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