Residential brokerage is moving to a flat-fee model, and commercial brokerage may not be far behind. The UK-based residential realty firm Purplebricks is making its foray into the US market with an office in Los Angeles. The company works on a flat-fee, rather than commission-based, model, and has seen major success. It is the number one residential brokerage firm in the UK and expanded to Australia last year.

“Given the changing consumer behavior, the marketplace was thirsty for a model with both great service and value,” Eric Eckardt, CEO of Purplebricks, tells GlobeSt.com. “Today, we are now the number one real estate firm in the UK. The US has one of the highest commission rates for an industrialized nation. Right now, commission rates are anywhere fro 5% to 1 0%, despite the fact that home values have increased over the last decade. As a result, consumers have spent more than $70 billion per year in commissions. We thought that the US was the next logical step.”

The firm chose to launch in the Los Angeles market because the state of California has the highest transaction volume in the country with average sales prices that are twice the national average. Combine the high sales volume with Los Angeles' density, and it was an ideal market for the firm. “California also has a lot of high-density populated areas,” says Eckardt. “We really build the brand first, and we felt that, given our marketing and advertising dynamics, that we could reach a lot of consumers. There are more than 5.5 million households and 17 million people in the area where we launched, so it is a great way to launch a brand like Purplebricks and test our offerings in the marketplace.”