TIDMPURP
RNS Number : 8327Q
Purplebricks Group PLC
15 September 2017
15 September 2017
Purplebricks Group plc
Purplebricks launches in the US
Purplebricks Group plc (AIM: PURP) ("Purplebricks" or the
"Company"), the hybrid estate agent, announces that it is formally
launching its business in the US later today. In line with the
region by region rollout successfully adopted for entry in the UK
and Australian markets, the US launch will commence in Los Angeles,
before extending across the state of California and other targeted
key states thereafter.
As the 6(th) largest economy in the world by GDP and the leading
US state in terms of both number of annual real estate transactions
(442,320, source: California Association of Realtors(R) ) and an
estimated commission income of $12bn p.a, California is the natural
launching point for US expansion. Although California, at 12.6m
households has less than half the UK equivalent, the level of
commission income in California is more than double that of the UK.
The diversity and density of the Los Angeles population and broad
spread of low to high price properties, will enable us to
demonstrate the high quality of service across all demographics and
the potential savings that customers can achieve.
The Purplebricks technology platform and customer offering has
undergone a transformation to meet the intricacies of the US
market, while staying true to the core customer proposition of
value for money and high quality customer service. This is
delivered through a combination of Local Real Estate Experts
(LREEs) and technology. Purplebricks has successfully adapted its
technology and customer offering previously with its launch into
Australia in 2016.
US real estate market dynamics and Purplebricks' pricing
model
In the US, the sale of residential property is typically
conducted through a Listing Agent (sell side) and a Buying Agent
(buy side). The Listing Agent will agree with the vendor a seller's
commission (typically between 5 and 6 per cent of the sale price)
and list the property on a Multiple Listing Service (MLS). The
primary purpose of an MLS is to provide a facility for Listing
Agents to publish all of their listings, enabling Buying Agents to
introduce potential buyers, and therefore earning a share of the
seller's commission (typically 3 per cent). The Listing Agent may
also act as the Buying Agent by introducing buyers to its own
listings, thereby securing the full commission or by introducing a
buyer to other agents' listings and earning the buyers' commission
of typically 3 per cent.
Purplebricks will charge sellers a flat fee of US$3,200 to list
their property. Sellers will also be responsible for paying a buyer
fee on closing. By way of example, using the average LA house price
of $560,000, Purplebricks could save sellers as much as $16,400,
based on a seller's commission of 6 per cent and assuming a
Purplebricks' buyers commission of 2.5 per cent. There will also be
an option for sellers to defer payment of the listing fee.
A key attraction of the US market for Purplebricks and a
substantial opportunity is the potential to earn buyers commission
immediately. From today buyers will be able to go onto the
www.purplebricks.com website and view all of the properties for
sale in the LA market with all agents on the MLS. Buyers will be
able to access these properties through our leading technology
platform and best in class search functionality, which operates
24/7. Similar to the UK and Australia, buyers will be able to
arrange showings, submit offers in real time and negotiate sales on
our properties with the click of a button, communicate directly
between buyers, Buyers Agents and sellers and, in essence, make
deals happen faster.
For the first time with Purplebricks, buyers will be able to
tour properties from the comfort of their living room using 3D
virtual reality, through leading provider Matterport. Should this
initiative prove successful, Purplebricks will look at extending
this and other technology advances to the UK and Australia. As an
additional benefit, buyers who select Purplebricks to act for them
as their Buying Agent (resulting in Purplebricks earning the buy
side commission of typically 3 per cent) will be eligible to
receive a $1,000 cash payment on closing.
Highly effective marketing and LREE recruitment
Through our US research and customer insights it is clear that
for many the high costs of moving are either not fully understood
or are perceived as excessive, acting as a significant drag on
transaction volumes. In addition to US consumers being unhappy with
paying high fees, it is clear that they want the kind of
convenient, instant and transparent 24/7 service offered by
Purplebricks.
Marketing remains a key element of Purplebricks' success, having
built the UK's most well-known national estate agency brand in just
three years (source: The Nursery Research and Planning). The extent
and nature of the Purplebricks TV adverts remains ground breaking.
Plans for the US marketing are equally so, with the TV adverts
launching across Los Angeles today. The focus for sellers will be
on "Real misery" - "the misery you feel when you pay too much in
commission" and for buyers - "Real misery - the misery you feel
when you miss out on your dream home."
Alongside technology and marketing, it is the talent, dedication
and passion of our Local Real Estate Experts that is the key driver
of Purplebricks' success. The US will be no different. Recruitment
of the most talented agents in California is ongoing and continues
to make considerable progress. At launch today there are initially
30 LREEs who have completed the three stage recruitment process and
undergone the ten day full time induction course.
Recruitment is continuing at pace, with the aim to have around
50 LREEs in the market within weeks. We have been impressed by the
quality and extensive industry backgrounds of applicants, with many
citing territorial exclusivity and the ability to focus on
delivering for customers, rather than having to spend considerable
time prospecting for the next opportunity, as the key attractions
for joining the Company. Those that join the Purplebricks team will
benefit from the extensive TV and radio led marketing that will
secure leads and generate activity for all LREEs.
Driving the growth and supporting the LREEs is a highly
experienced team, with decades of US real estate experience, led by
Eric Eckardt, US CEO, Phil Felice, Head of Sales, and Jonathan
Adler, Marketing Director and supported by the founders, Michael
and Kenny Bruce. Purplebricks has an office in Irvine, California
and in Manhattan, New York. US management continues to build out
the local teams and infrastructure necessary to succeed, whilst
tapping into the expertise and experience of the UK and Australian
management.
Commenting on the announcement, Michael Bruce, Group CEO,
said:
"Launching Purplebricks today in the US is the single biggest
moment in the Company's three-year history and a proud moment for
me personally. It is testament to the quality and dedication of the
team that we have achieved this ahead of schedule and expectations.
We are excited about the opportunity, in this $70bn market, while
mindful of the challenges. We have planned accordingly, adapting
both our technology platform and customer proposition, while
building out an infrastructure and local team, with decades of
experience. As we rollout across California and beyond we will
closely monitor progress and have the capability to further quickly
and efficiently refine our model, if and where necessary.
For the LREEs we recruit, Purplebricks presents an exciting new
platform to build scalable, profitable businesses in their own
dedicated regions, supported by our strong technology
infrastructure and the benefits of our extensive TV and radio led
marketing. I am very excited about the quality of the applicants
keen to be part of our ambitious US growth plans. For sellers, we
offer a more efficient and effective 24/7 service and the ability
to save thousands of dollars. Buyers will benefit from access to
our leading technology, best in class search functionality and a
faster, more efficient service.
Purplebricks is now in three continents in just over three
years. We are confident that we are leading irreversible change in
the industry and that we are best placed to realise the future
global opportunity."
The Company will be releasing a trading update ahead of its AGM
on 29 September 2017.
For further information, please contact:
Purplebricks +44 (0) 20 7457 2020
Michael Bruce, James Davies
Zeus Capital (NOMAD) +44 (0) 20 3829 5000
Nicholas How, Benjamin Robertson
Peel Hunt (Broker) +44 (0) 20 7418 8900
Dan Webster, George Sellar
Investec Bank (Broker) +44 (0) 20 7597 5970
Keith Anderson, Carlton Nelson
Instinctif Partners +44 (0) 20 7457 2020
David Simonson, Mark Reed,
George Yeomans
Notes to Editors
Purplebricks is the leading next generation estate agency in the
UK and Australia, combining highly experienced and professional
Local Property Experts and an innovative use of technology to help
make the process of selling, buying or letting so much more
convenient, transparent and cost effective. Purplebricks is
transforming the way people perceive estate agents and estate
agency. Building on its UK success, Purplebricks launched into
Australia in August 2016 and in February 2017 announced plans to
enter the US market.
Unlike traditional agents, where customers only pay upon the
sale of the property, which effectively means that those that do
sell pay more in order to cover the costs of those that do not
sell, Purplebricks believes it is more equitable that everyone
should pay, charging a flat fee at instruction. This helps to avoid
the industry issue of timewasters and those that are merely
'testing the water' and underpins the low, flat fee model.
Customers in the UK and Australia can choose to pay at
instruction or defer, at no extra cost, to the earlier of ten
months from the date of instruction or the date of sale. If a
customer wishes to defer payment, they are required to use
Purplebricks' conveyancing services for the sale.
Purplebricks charges GBP849 (inc. VAT) for a sale anywhere in
the UK other than in London and surrounding areas where there is a
charge of GBP1,199 (inc. VAT). There are additional charges if the
customer wants Purplebricks to undertake the viewings on their
behalf, if they require an energy performance certificate or a
Rightmove premium display, amongst other services that are
available.
The business model is low cost, flexible and cash generative,
without the need for an expensive leased estate. LPEs are
self-employed and receive a flat fee per instruction and can earn
additional fees from the sale of ancillary services including, but
not limited to, conveyancing, mortgage referrals and insurance.
Purplebricks listed on the Alternative Investment Market (AIM)
in December 2015, raising GBP25m of growth capital before listing
costs at 100p per share. In February 2017 Purplebricks raised an
additional GBP50m (gross) through a share placing to fund US
expansion.
This information is provided by RNS
The company news service from the London Stock Exchange
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