Purplebricks, one of the buzziest flat-fee real estate startups abroad, is six months into its attempt to infiltrate the U.S. market. But a dispute raising questions about its sales figures in the U.K. has the potential to influence how the company is viewed in the U.S — even if the same problems won’t pop up here.
Purplebricks’ troubles started earlier this month, when an analyst at the firm Jefferies put out research suggesting that although the company claims to sell 78 percent of the homes it lists, the real figure was closer to 50 percent. Purplebricks’ stock tumbled in the weeks after the report.
Like some U.S. startups, Purplebricks aims to woo consumers by charging a flat fee for selling their homes instead of a standard percentage commission. The difference with Purplebricks is that the startup charges that flat fee — $3,200 in the United States — before the home sells. If the home doesn’t sell, the fee is not refunded.
Purplebricks strongly denied the claims of the Jefferies research. The Jefferies analyst, Anthony Codling, tracked Purplebricks’ listings from the month of November 2016 to see which houses had sold within 10 months.
That methodology, Purplebricks said, didn’t take into account listings that sold but hadn’t yet been uploaded to the U.K.’s Land Registry, which tracks sales and can take several months to update. Also, Purplebricks claimed, the firm’s research missed out on properties that were in the final stages of closing.
Purplebricks also pointed to what it calls “marketing breaks,” when clients whose homes aren’t selling remove their houses from the market in line with seasonality or to do renovations.
The firm Peel Hunt also countered Jefferies’ findings.
The U.K. saga whipped up as Purplebricks prepares to launch in New York and the surrounding tri-state area after its initial U.S. launch in California six months ago. The company declined to share what percentage of its homes have sold in the U.S. so far.
“This has no impact on our business,” Purplebricks U.S. CEO Eric Eckardt said in an interview. “If anything, what we’re seeing in the marketplace is that our model has been well received, and we’re moving ahead of plan.”
As Purplebricks gets off the ground stateside, it’s less likely that the company will face a similar squabble here. The multiple listing service system in the United States makes property buying and selling information much more publicly available than it is in the U.K. That system means it’s unlikely there would be such a wide discrepancy between company reporting and external analysis.
“The information should be readily identifiable. When a property gets listed with Purplebricks, it goes into the MLS. Great Britain does not have the same MLS structure the U.S. has,” said Russ Cofano, a longtime real estate brokerage executive. “It should be easy for Purplebricks and its competitors to look at that information through MLS data and see how quickly a home sells.”
Eckardt agreed that his side of the Purplebricks business would be less likely to come up against a similar situation.
“What’s good about the U.S. market is that it’s public information. Analysts or any individual should be able to gather the statistics around our sales performance with accuracy,” Eckardt said.
So if Purplebricks really does sell only 50 percent of the homes it lists, U.S. sellers will find out a lot sooner.
