Purplebricks’ founder Michael Bruce recently claimed the company “sold 88% of its instructions within ten months” in response to a complaint on BBC Radio 4’s Moneybox programme.
We, along with everyone else I’m sure, would like to know how he arrived at those figures and whether those who’ve already dropped out of the selling process – and switched back to a traditional agent in frustration – have been included in his sums.
We don’t think it’s unreasonable for Mr Bruce to substantiate his claims, in a way that a customer would understand.
Is he saying 88% of ALL instructions go on to complete within ten months? This seems inordinately high, though the ten-month timeframe indicates just how terrible they are at actively generating viewings and offers for their vendors. There can’t be anything worse than feeling trapped by an agent who has taken your money and is doing very little for you. The average independent agent will agree a sale on a property within 14 days.
Or is the ten months referring to the time from an agreed sale to exchange or even from exchange to completion? If he is so proud of the company’s success rate, why does he not reveal his figures in detail?
Already City analysts have queried exactly how many sales have gone through and what the conversion rate is. So why be so prickly, Purpleprickles? Just exactly how long does it takes on average to complete a property sale from its initial listing? And when realistically is the company planning to turn a profit?
The more I look at Purplebricks’ model, the more I wonder how the company is actually going to make any money, something they’ve failed to do in their first two years of trading. They may be the champions of a poor performing sector as a result of expensive TV ads, but they will have to keep spending millions of pounds every month on marketing in order to maintain their position, while other online and hybrid agents snap at their heels like hungry piranhas, forcing fees down.
Plus there are the costs associated with marketing a property. People don’t realise how much it costs to advertise online or via traditional media – it can be up to £2k on average per property for sale. So how can you make money if you are charging less than £1k for the whole service? Their recent price hike on fees won’t do much to close the gap.
It’s already become a vicious cycle for all involved, with everyone discounting in order to get volume of sales, but the market for online sales isn’t big enough to sustain the model. The last time I looked, there were around 40 online agents fighting for a small slice of the market.
So will Purplebricks’ losses continue to mount, at a time when online agents are facing increasing criticism for failing their clients – something which I’ve commented on previously? Let’s see whether the Aussies have confidence in the model Down Under. My information is that ‘prickles’ have had to change their model and it’s not going too well after a £10million investment!
Hope on homes or empty promises?
There’s no doubt the Government is making all the right noises over housing, with plans outlined at the Tory Party conference for a new £3bn fund to help build over 225,000 new homes, alongside efforts to speed up house-building.
It may sound like a lot but it’s a drop in the ocean to fix a far larger problem. The Government may get close to their target but if the vast majority of units are flats it won’t satisfy the market’s need for family homes.
We need to understand exactly how they intend this to become a reality and whether housebuilders are able to gear up with materials, land and labour to make this happen. What exactly does the Government intend to do to sort out our antiquated planning laws?
We know there’s no quick fix – but while the Government sorts out the detail, our population is continuing to grow and people are living longer, widening the gap between demand and supply. What’s the housing shortage going to look like in a decade if this issue isn’t tackled quickly?
As for those trying to get on the housing ladder, scrapping the Help to Buy Mortgage Guarantee Scheme and expecting lenders to get the market moving for first-time buyers is not sufficient.
We need some radical thinking from Mrs May. Come on, Theresa, we need you to overturn the recent stamp duty hikes to get middle England moving. We need to do everything we can to encourage buyers and investors back into the market.
House prices are already beyond the reach of many would-be buyers, particularly in major cities and in the south-east, where no 95% mortgage is going to make any difference, given the size of deposit that people have to find.
It’s ironic that money is poured into housing benefit to help those who are most in need financially, but far less is spent on housing, whether subsidising developers or giving the green light to housing associations and those few local authorities that have their own development divisions.
Let’s hope we’ve heard an end to the rhetoric and broken promises from the Government. We need a sustainable housing policy, supported by investment in infrastructure, which can bring hope to everyone, whatever age they are, and we need it now.
Are agents to blame for board chaos?
Yet more local authorities are planning to restrict the use of For Sale boards, according to an investigation by Property Industry Eye – and I’ll lay money on it that, in most places, estate agents have only themselves to blame.
Unsightly rows of boards have been allowed to proliferate around housing developments – with some agents flouting the law and putting up more boards than they should or ‘forgetting’ to take them down once the property has been sold, not adhering to the law.
The result is that local authorities are increasingly looking to restrict the use of boards, forcing agents to apply for planning consent in some areas – with the possibility of permission being refused. This is already in force in Leeds, Camden, Wandsworth, Hammersmith & Fulham, Hastings, Brighton & Hove, Preston, Waltham Forest and Newcastle.
It has now been revealed that four more councils – Charnwood, Bath & North East Somerset, Leicester and Swindon – have applied to the Department for Communities and Local Government for permission to impose a ‘Regulation 7 direction’, forcing agents to apply for planning permission in order to display boards, with fines if they break the rules.
You might have some sympathy in areas of historic interest, but to impose such restrictions elsewhere leads only to additional time and financial costs for agents – and this will surely be passed on to the consumer. The agent who chooses not to pay will be the one who loses out by not having a visible presence in their local area.
So are boards relevant in this current day and age with the internet? Does it really matter whether our signs are on display or not? I’ve yet to meet an agent, traditional or online, who doesn’t see the direct correlation between board presence and new listings, so the answer is yes, it really does matter.
I’d like to know what impact it’s had on estate agents in those areas where restrictions are already in force and whether it’s become a case of the survival of the fittest.
I was in Manchester recently and it seems to be common practice that when a vendor goes multi it’s a free for all with boards which eventually will be clamped down on.
We must also look at how boards are used to advertise local events. My own company, haart, was caught in the middle of a dispute not long ago that was not of our making. One of our branches had been approached to advertise a local event on our sale boards. These boards were put up in areas where the organisers had obtained consent – but we bore the brunt of the complaints when it reached the local media – all for trying to support the local community.
So where will this all lead? Will other councils follow suit and come down on agents like a ton of bricks? I’d say this was in the hands of the agents themselves.
If they continue to think they are above the law, they will only have themselves to blame when one of their most effective advertising methods is taken away. They will end up having to spend yet more money on other marketing methods – at a time when promotional costs are rising and fees are falling. That’s not a good combination for anyone.
Agents should be sensible and not flout the law as we will all suffer in the end.
* Paul Smith is chief executive of large independent firm Spicerhaart
Nail on head line from article Down Under
‘PurpleBricks don’t actually sell the house for that fee. You do.’
http://www.validum.edu.au/purplebricks-real-estate-renegades-freelance-fad/
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With regards to Purple Bricks, my understanding is that Rightmove effectively charge a membership fee for every 36 available properties (what they calculate as the average stock level for an agent branch in the country). This would appear to equate to a fee of £200 to £250 for Rightmove listing alone. I do not know how Zoopla charge in comparison, but overall I suspect total listing charges for both portals probably amount to £300 per property. That’s a huge chunk out of the fee PB charge. Add in the fee for the LPE (anyone know what that is?) and there can’t be a lot left to cover any other costs (such as admin etc.) …..let alone marketing costs to obtain the stock in the first place.
I may have these costings for the portals completely wrong….if people out there know better than I then please comment.
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Well for a start do they pay per 36 real listings, or per 36 recycled old listings? (I trust that it’s the latter, Rightmove..?)
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PB pay their standard LPEs £150 per instruction. An extra £50 goes to the Territory Manager.
If the Territory Manager instructs a property then they get £200.
Effectively, they pay out £200 per every new instruction.
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maximum average listing per month based on £18million TO= 2000 units per month
2000@£200 = £400,000 gross income for all 300 LPEs
£400,000/300 = £1333.33 average per LPE/month
£1333.33/ 162 hours = £8.20 per hour compared with the average national wage of £14/hour
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I think Mr Bruce forgot he was broadcasting to the nation rather than giving a private motivational fund raising speech to stupid, greedy people, people who are all too eager and keen to invest in the King’s new wardrobe.
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But he will still get away with it unless someone challenges and disproves the statement….with publicity. All the listeners heard was the statement and many will believe it …as it was on the radio.
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Excellent article thank you!
Love the “prickles” – so much kinder than my description!
The Bruce brothers got the share money so they’ve done well and continue to get annual salaries/divi’s of around £150k but we all know what happens to a house of cards!!
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According to RM, (find agent, locate PB head office) PB listed 231 properties in the past 14 days. 205 properties are still available. In the past 7 days 119 properties listed with 7 of those marked as stc. During the past 14 days they are listing nationwide an average of just 16 per day. This has been the case recently. So if we say 50/50 split of higher and lower fee £707.50 + vat and £999.16 + vat of the past 14 days gives us £82,070 + £114,903 = £196,973 + vat. These numbers suggest PB is not in a good place!
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I wonder how many of those 231 properties were ‘re-listed’ after marketing breaks?
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You know a man who knows the answer to that, Mr W!
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Is there anyway we can double check these figures? I am not disputing what you are saying, but they are just so poor….it’s almost unbelievable. I wonder what the total for 2016 now stands at?
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badger
That’s one “branch” you’ve located and checked.
What about the others?
See the Z figures – then you’ll see what I mean.
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Dear Mr Smith,
I would have thought the underlying lack of property for sale across the UK would be the bigger issue. We are selling our stock very fast and I would have thought PB could sell a fair bit of their stock reasonably quickly but the new stock coming to market is probably the biggest problem.
The numbers of new instructions they need to work on to make any money at all would suggest they must be failing in any event.
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That’s very true, we are experiencing the same….but I thought it was possibly partly due to my enforced absence from the frontline for 6 months this year. I thought high marketing , high spend companies would be far less effected.
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Bricks, a distinct lack of realism!! In my home town of Aberystwyth they are seeking to recruit a LPE with anticipated earnings of £45k .They currently have 7 instructions including 1 new instruction in the last 3 months . 3 of the 7 properties have been on the site for over 12 months!! To my knowledge they have sold 4 in the last 12 months One of which the vendor has actually sold elswhere so doubt they even got a fee
Admittedly, Aberystwyth is a small town with a sparsely populated rural hinterland and the LPE would serve a much wider area .They would have to just to pay for their petrol ! Lets draw their area to a 30 miles radius of Aberystwyth bearing in mind one half is the sea they currently have the grand total of 35 instructions . Jon Hunt eat your heart out .No wonder they are experiencing a high turnover of staff. The 43k instructions forecasted by the Hardman Report accompanying their listing looks like a very distant ship far away on the horizon
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From my calculations the average PB LPE is instructing 7 a month.
They are paid £150 per instruction = £1,050. I don’t know how they can advertise those salaries. Very misleading.
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£150 inclusive or exclusive of VAT?
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Exclusive of VAT. Very unlikely any LPE gets near to the VAT threshold.
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If LPEs’ are charging inclusive of VAT when not liable, why is HMRC not taking a MUCH closer interest?
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Hi Chris
the LPE ( misdiscription ) is not charging VAT, Purple (*)ricks is charging the VAT and the LPE ( laugh ) is paid a fee.
just a point of note 🙂
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at those numbers, any lister capable of making a living ( you know, mortgage, kids, pets, life ) out of PB will get poached by local at the money PB pay and then some, every time
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Collectively PB look big, they are not. Break it down to LPE’s and they are very very much smaller, as are all the other on-liner only models. Even a little local high street office preforms better? PB costing’s are a mess and how they are allowed to get away with the market share price is beyond comprehension.
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Your right, trading standards should see every area as a seperate entity. A 1 branch owner who actually cares about his local town is not even trying to compete on a national basis and so shouldnt be judged on his size…
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Absolutely. National companies have been using national stats, misleading local consumers about local agents for far to long. Interestingly there is a bit of BPR’s which specifically outlaws this practice! But as is the norm, no-one is policing. Just about all On-liners do it (can’t think of one that hasn’t) the worst was House Simple and his £5k saving marketed nationally but not nationally a common saving.
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I wonder if enough of us contact Radio 4’s Money Box program (moneybox@bbc.co.uk or @paullewismoney) challenging PB’s sales claims, they would take the action to either probe PB for the calculating metric and the true number or issue an apology for broadcasting false and misleading information.
PB’s accounts up until April 2016 filed with Companies House, shows revenue at £18,603,679 and a loss of £11,901,831. With the revenue figure, I guess we can do some calculations around how many instructions for FY 2015/2016?
PB are never going to reveal to us directly how they calculate their numbers. They class themselves as estate agents but we never see them contributing to the discussion. I’m thinking with director emoluments listed as £1,174,885 they probably don’t think they need to…
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why not rogue traders ?
LOL
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As one of the people who helped focus Money Boxs’ attention onto the call-centre/ hybrid claims and is in contact with both Paul Lewis and his team as well as Winifred Robinson of Radio 4s’ ‘You and Yours’, I can assure readers that they are keeping a close eye on this and further broadcasts may be expected on the topic.
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remember that some of that total gross income comes from conveyancing referrals so the number of instructions will be even lower than calculated here.
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£18.6 million at £1080 average (they posted that figure in a press release Winter 2015) gives 17,225 listings, which averages 1435 listings per month, 1565 short of the 3000 they reckon they are listing.
If they are only charging £800 per listing they managed to list 1937 per month, still over 1000 properties short of their claims to investors.
The rest of the numbers beyond that are so open to manipulation any sort of analysis is futile.
One suspects his pants are very similar to the Royal Clarence Hotel
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and the share price is still trading 89 pence to high, in my opinion, but it looks like it’s heading in the right direction.
any want to guess at the offer price by Xmas?
36 pence anyone ?
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If they start to get investigated …. bin bag price.
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