Purplebricks flat-rate real estate agency closes US business

After building a successful UK business with its flat-rate property model, purple bricks set a goal of finding similar success in the United States, but now, less than two years later, the American dream of Purplebricks is dead.

Purplebricks announced Monday it is shutting down its US operations and will instead focus on growing its UK and Canada business.

According to the company, it has grown “too quickly” in the United States and after undertaking a strategic review of its options, it chooses to leave the United States entirely.

“We have made the difficult decision to exit our operations in Australia and the United States, as it is very important that we now focus our resources on the United Kingdom and Canada, where we have a strong established presence and where there is significant market growth opportunities. share and generate profitable growth for shareholders, ”Purplebricks CEO Vic Darvey said in a statement.

Darvey became CEO of Purplebricks in May following the resignation of the company’s founder and previous CEO, Michael Bruce.

It’s a rapid fall for Purplebricks, which entered the United States in August 2017 with big plans. The company has touted its commission-free real estate model, which it says could save home sellers thousands of dollars in a real estate transaction.

Purplebricks said what sets it apart is that home sellers only need to pay a lump sum of $ 3,200 to list their home and, on closing, pay the buyer’s agent commission. The lump sum was the same for homes of all values.

Company’s business plan received approval from European media giant Axel springer, which invested $ 177 million in the company last year. In exchange, Axel Springer acquired 11.5% of the company.

According to Purplebricks, the cash injection was to be used to “accelerate the expansion of Purplebricks into new target markets, advance technological innovation and expand the company’s service offering.”

At the time, Purplebricks said $ 71 million of the $ 177 million needed to be set aside to accelerate the company’s growth in the United States. its operation in the United States so far.

The company’s first US market was Los Angeles, before expanding later in California to Fresno, Sacramento and San Diego.

The company was already preparing for its next move to the United States, announcing last year that it was expanding New York. According to the company’s website, Purplebricks services are now available in the Phoenix area, the Orlando area, the Los Angeles area, and the New York area.

“Axel Springer’s strategic investment in the Purplebricks platform is a clear endorsement and a reflection of confidence in our business model and global ambitions,” Bruce said just over a year ago.

“This investment will serve to bring our highly differentiated, profitable, consumer-centric model to buyers and sellers in new markets across the United States more quickly,” continued Bruce.

Now, just over a year later, Bruce is stepping down as CEO and Purplebricks is leaving the United States.

According to the company, Purplebricks spent around $ 66 million on its foray into the United States and expects the “initial reduction” in closure costs to be between $ 5 million and $ 7.5 million.

In his statement, Darvey said the company expects its exit from the United States to be “conducted in an orderly fashion” and completed by the end of 2019.

(h / t Bloomberg)