Competition often breeds innovation and progress. In the real estate industry, status quo has kept the system roughly the same for decades — the addition of tech-based searches and online listings notwithstanding — but a disturbance in the force is imminent, and its name is Purplebricks.
The Purplebricks Difference
Purplebricks is a U.K.-based agency that made headlines in February 2017 when it announced its plans to enter the U.S. market with some $63 million in funding already in place. The addition of a new name isn’t what has the real estate world raising its collective eyebrows, however; it’s what the new name is doing. Purplebricks eschews the typical hands-on client-broker relationship in favor of a team of experts who conduct valuations of properties before handing over the actual buying and selling to a network of online systems.
The biggest benefit of this system seller-wise is a markedly lower price point. Instead of the percentage-based fees traditional real estate agents currently charge, Purplebricks’ online-only approach revolves around a flat fee. In the U.K., costs that have long hovered around the $7,000 mark, on average, dropped to a mere $375 (plus tax). While it remains to be seen what the pricing model will be stateside, it’s all but guaranteed that the difference before and after Purplebricks will be significant.
The Personal Touch: Does It Matter?
While many experts are enthusiastically shouting about Purplebricks’ status as the “next big thing” to shake up American real estate, other industry insiders aren’t so sure. Adam DeSanctis of the National Association of Realtors told CNBC, “(Real estate agents here in the U.S.) have a unique understanding of what buyers’ value in their local markets. Their real insights and local market knowledge and ability to help consumers navigate each step of the transaction would be extremely difficult to imitate in an online-only model.”
In other words, computers aren’t going to tell you what it feels like to walk down the streets of a certain neighborhood or which local pizzeria really has the best pies. While those details may not make a sale, the absence of so-called “color commentary” could easily foil a connection a client might otherwise make with a property and the community it’s situated within.
A Push for Progress
Remember when we talked about the concept of competition leading to innovation? It turns out that more than half of real estate agents surveyed agree. The success Purplebricks has already encountered in the U.K. is telling. While naysayers may continue to doubt how home seekers will adapt to online-only agents, and certainly a completely digital industry may be many years away, the mere existence of this disrupting influence will likely push traditional agents to explore technological alternatives and increase their perceived value.
If agents are going to cost five times their online counterpart, they had better provide five times the service. What will that look like? It may be that nobody really knows, but with Purplebricks setting up its virtual shop this year, it’s almost guaranteed that we’re all about to find out.
In the end, hybrid brokerages seem to offer a win-win scenario. Costs are lowered for those selling homes, agents are driven to hone their skills and create real-world experiences a computer can’t duplicate, and technology is used in new and exciting ways. With insurance, entertainment and travel planning all moving online over the last couple decades, why should real estate be any different?