U.K.'s Purplebricks comes to Canada in a bid for real estate disruption: Don Pittis

An international online property powerhouse has purchased one of the world's top web-based, commission-free real estate companiesin a bid to shake up the Canadian home-selling industry.

Last month's successful $51-million bid for Quebec-basedduPropriomeans "For Sale" signs bearing thenamePurplebrickswill soon start popping up across Canada, says the company's president, Michael Bruce. Also watch for some major advertising campaigns.

TraditionalCanadian real estate agents scoff at the idea Bruce can disrupt how homes aresoldhere with his discount model that charges aflat fee for the services of a real estate agentrather than a sales commission.

But from a standing start in 2012,Purplebrickshas taken over aboutfive per cent of the British market and has expanded to Australia, the U.S., and now Canada.

Powerful in Quebec

Based onmarket share, the Canadian company thatPurplebricks bought is itself a global leader in discount real estate services. Within Quebec, duProprio commands about 20 per cent of the market.

The biggest selling point of bothPurplebricks andduPropriois avoiding the five per cent commission traditional brokerages charge.

As of last week, the Canadian Real Estate Association reported that the average Canadian resale house now goes for $481,000. The duProprio online calculator says using its services on that average house would save you more than $27,000.

"In my opinion, that's very misleading," says Christopher Alexander, anexecutive withreal estate firm ReMax.

Alexander says studies have shownthat for-sale-by-owner transactions earn significantly less on the market.

"So, sure, you save $27,000, but if you could have gotten an extra $50,000 on the sale of your house, you're losing money," he says.

Honda orPorsche

Alexander says doing a property deal can be "pretty scary" and having a full-pricebroker to hold your hand can make a difference.Not only that, he says, with traditional brokers you only pay if the sale goes through.

"Like any industry, you can pay a premiumfor a good service," Alexander says. "You can buy a Honda, or you can buy a Porsche."

According to Purplebricks's Bruce, the reason his company has done so well is that people would rather only pay for a Honda. And rather than being a for-sale-by-owner company, he says Purplebricksoffers full agent services without Porsche pricing.

"What Purplebricks is, is a flat-rate, fairly-costed, full-service real estate agent," he says.

The company focuses on marketing and driving new clientsto its website.Then licensed real estate agents are sent out to those clients to provide their professional services, from initial pricingto helping with negotiations.

Good agents badly used

He says the conventional industry recruitsagents who are good at property transactions but then misuses them.

"Actually, 85 per cent of their time is spent acting likemarketers, trying to prospect, trying to find the next customer, and they're not very good at it."

He says Purplebrickstakes that duty off their hands.

"We create all the opportunity, so therefore that frees them up to deliver an exceptional service to customers."

He says the company is efficient and can offer discount services because it has little office space and its agents spend their time doing what they do best.

As to getting a worse price than traditional firms, Bruce says that's not what the U.K. numbers show.

"We sell houses faster, we get more money for our customers than our competitors, and that's why we're the most positively reviewed real estate agent in the world," he boasts. However, the company has also been accused, in Britain and Australia, often by competitors, of misleadingthe publicwith its advertising.

While duPropriois already doing a roaring business in Quebec, its subsidiary in the rest of Canada, Comfree, is a less familiar name. But Bruce says those Comfree signswill be among the first to be replaced by the Purplebricks brand.

However, as ReMax's Alexander says, Purplebrickswon't be the first discount real estate company to try its luck in Canada. He notes low-priced services are easier to offer when houses sell quickly. Some saylast year's downturn in the market was what put the knife intoToronto-based discounter The Red Pin, which went broke in June.

On the other hand, as Red Pin CEO Keith McSpurren said at the time, the Canadian real estate industry is still ripe for disruption.

Certainly Purplebrickshas deeper pockets than The Red Pin ever did, especially after a recent $200-million investment from German publisher Axel Springer. Purplebricksis spending some of that money expandingoutside Quebec. The jobs page at Comfreehas a series of recent listings.

If it isdone well, grabbing a share of the real estate business with discount services is not so far-fetched.

Discountservices in the financial and insurance sectors, as well as familiar names such as iTunes, UberandAirbnb, have all disrupted their industries at the expense of traditional players.

And if Purplebricksis a success here, watch for thebig players to try to join the party.

Follow Don @don_pittis