Orlando's red-hot housing market has lured another low-cost, tech-focused real estate brokerage seeking to disrupt the traditional home sales model.
Purplebricks, which launched in the UK in 2014 and expanded a year ago to several U.S. markets, opened its Florida operations Tuesday with service in Orlando and Tampa. The company offers sales marketing a brokerage services for a flat rate of $3,600, regardless of the price of the home.
The seller pays a traditional 3 percent commission to the buyers' agent, making Purplebricks a hybrid between traditional commission-based services and discounters like Redfin.
Orlando has become a laboratory for new real estate focused revenue models. Zillow Instant Offers began testing here in the spring. And Sarasota-based Realty Partners entered the Orlando market utilizing a structure to a law firm and offering agents ownership shares and a white Mercedes. Other agencies are eliminating commissions all together and charging clients hourly rates.
Purplebricks appeals to consumers who are tech savvy and demand more transparency from service providers.
“The fact is that before Purplebricks, there was little to no visibility into the home buying and selling process – the agents had all the control, which allowed them to hike up commission fees and dole out information as they saw fit," U.S. CEO Eric Eckardt said. "We have remedied this conundrum by providing a full-service offering that grants total transparency into the entire process, empowering our clients to play a greater role in the sale of their homes in partnership with our local real estate experts.”
The company opened its first U.S. offices in California and expanded to the New York's Tri-State designated market area in the spring. It has since hiked the flat fee by 12.5 percent from the original $3,200 figure.
Aaron Drucker, a real estate professional with more than eight years of experience in the Florida market, has been tapped to serve as Florida State Director. He said the company chose to focus initially on Orlando and Tampa because those are two of the most robust housing markets in the nation.
During the rollout, Purplebricks will saturate the I-4 corridor with TV, radio and digital advertising.
How much success national, online-focused providers will find in Orlando remains to be seen. Jimmy Tate, broker-owner of Waypoint Real Estate Group, said the industry's growing reliance on algorithms and artificial intelligence isn't a substitute for human contact and expertise.
"I think there's a market for some of this," Tate said. "There are a lot of bargain hunters out there. A lot of it depends on age demographics and experience. Because we service luxury, high-end real estate, those owners and buyers understand the value that experts bring to the table."
Jeffrey Eddowes, a broker with Century 21 Blue Sky, said companies like Redfin and Purplebricks tend to hire less experienced agents who don't understand how to properly price or represent their clients' best interest.
"I think you'll always have people who will experiment, and there's always room for competition," he said. "But in the end, people will go back to what they trust. When you're making the largest single purchase of your lifetime, don't you want someone who is experienced?"
Drucker disputes that assertion. He said Purplebricks has hired five "territory owners" for greater Orlando and four for Tampa. Each has an exclusive territory or submarket. In exchange for accepting lower fees, the company takes care of all the marketing, advertising and overhead costs, including providing transaction coordinators to service the closing.
"We have very experienced owners coming on board -- they have an average of 15 years in the industry," he said.