Purplebricks, a British-based online real estate service that marketed itself as a disrupter of the traditional home-sale process, is ending its United States business after less than two years.
The company, which was founded in the United Kingdom in 2014, announced earlier this month that it was leaving the American market. When it started its American operations in September 2017, it said that Southern California would be its prime target.
Purplebricks informed the California Employment Development Department in a July 12 letter that the company would close its offices on Spectrum Center Drive in Irvine by Sept, 13. Fifth-five employees there and 68 additional people, referred to as “independent sales agents,” will be let go by the closure date.
A company official, who co-signed the notification letter to the state, declined to comment on the situation.
The shutdown of all American operations is expected to be completed by the end of the year. Earlier this year, Purplebricks also announced it was leaving Australia’s real estate market and would focus on only the UK and Canada.
According to published reports, publicly-traded Purplebricks’ stock had lost 75% of its value in the 22 months since it announced its expansion. In its most recent fiscal year, the company reported an operating loss from its U.S. and Australian expansion of $42.9 million. The American operations contributed only 2% of Purplebricks’ total revenue.
Purplebricks charged its clients a flat fee of $3,200 to represent them, rather than the common practice of commissions for the buyer’s and seller’s agents at the conclusion of the deal. The fee was charged regardless of whether a sale went through or not.
Cristal Drake, a real estate agent who runs the Reliance Real Estate office in Fullerton, said she did have problems dealing with Purplebricks that started with the company’s advertising campaign. The ads stressed the fixed fee, and people who insisted on the traditional commission structure were told “you’re stupid,” Drake said.
Drake said logging on to Purplebricks’ website was unusually cumbersome. Also, she said Purplebricks’ agents were hindered by an apparent lack of experience.
In one deal, where Drake was representing the buyer interested in a property listed on Purplebricks, the seller’s broker “honestly didn’t seem to understand real estate very well,” and the sale did not make it through escrow. Eventually, the property sold for $55,000 less.
“The problem is, you attract Realtors that are not of the highest caliber,” Drake said. “A lot of people think it’s easy to sell real estate, that you just put up a sign, take photos and put them online. A good agent has relationships in the industry and knows the process.
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