The real estate market could be pivoting away from traditional models, according to a report [1] by CNBC. A six percent commission was all but standard in the past—since then, brokers have reduced that significantly to keep up with increasing competition.
Now, one fledgling London based brokerage firm is changing it up again—flat fees—and they’re bringing that model to the U.S.
Purplebricks [2] raised $60 million to start up an office in Los Angeles, California. The broker offers full services that are expected from any traditional firm—professional photography, listings, personal home tours, and 3-D virtual tours, all for a flat rate of $3,200. The model has been highly successful in the U.K., so much so they expanded into the Australian housing market in 2006.
"I think what's great about our model is that it’s new in the U.S., but it has been proven in the U.K. within three years," Eric Eckardt, Purplebricks' U.S. CEO said to CNBC. "When they launched in the U.K., they weren't the first flat-fee model, but the way they approached the market, with a full hybrid offering, with the customer service from listing to closing, with a local real estate professional to provide all the services associated with that—it has really been a competitive differentiator."
CNBC notes that Purplebricks isn’t the first flat-fee brokerage firm, another Reali [3], launched in San Francisco.
There are benefits for agents as well: no haggling, and no negotiating, meaning a more streamlined process for both buyers and sellers. According to the National Association of Realtors, CNBC reports, flat fee sales account for 2 percent of home sales.
Still, there doesn’t seem to be much push back from the industry, as long as consumers are happy.
"We encourage all business models to come in," Lawrence Yun, Chief Economist of the National Association of Realtors told CNBC. "We don't favor one business over the other, and we let the Realtors in a very competitive market do their best to get the consumers."