Purplebricks has admitted that its figure of 78% of homes it lists are sold is based on sales agreed – those sold subject to contract – and not on sales completed.
Lee Wainwright, UK boss of Purplebricks, was speaking on Radio 5 Live yesterday when his firm was accused of “taking the instruction, putting it online and walking away”.
The programme also heard, from independent industry commentator Kate Faulkner, that the “honeymoon” with online agents is now over.
In early trading this morning, shares in Purplebricks fell further, by around 6% to 395p. At noon today, further falls took the price down to 370p, down nearly 12% over the course of the morning.
During yesterday’s hour-long investigation into “online-only” agents, Wainwright criticised last week’s bombshell claims by analyst Anthony Codling of Jefferies.
Wainwright said the Jefferies’ allegation that Purplebricks sells only 51% of listings was “a very big claim – and it is not true”.
A report in The Times said that Purplebricks is considering legal action against Jefferies. According to the paper, Purplebricks is also investigating how its share price started to move down before publication of the Jefferies report.
Yesterday’s programme was presented by Adrian Goldberg with input from Guy Kilty, and started with Goldberg asking whether it was “a £1,000 coin toss” when customers went with Purplebricks, as Codling suggested.
He also queried whether customers should be taking everything they were told at face value.
Kilty pointed out that fees were paid upfront to online agents, whether the property went on to sell or not: “So it is a gamble.”
The programme said that Purplebricks’ sales rates were “better than the industry average” – but not the 78% it claimed.
Pressed by Goldberg as to how the 78% was arrived at, Wainwright said: “Sold subject to contract.”
Pressed again, Goldberg said that even by Wainwright’s own figure, it meant that one in five people were paying Purplebricks upfront “but not getting anything for it”.
Wainwright insisted that the reason Purplebricks had captured the public’s imagination and the reason for its growth was that “the old way wasn’t working”.
He also insisted that Purplebricks was not an online-only estate agent – the way the programme mostly referred to that part of the industry – but a hybrid, with local property experts providing the personal touch.
Kilty revealed that other online agents were critical of the Jefferies report, calling it “flawed” and inaccurate”.
Some case studies were included on the programme, with one couple claiming that after their initial Purplebricks LPE left the company, they heard nothing. They were tied into a contract and “felt stuck”.
They criticised the conveyancing service they had to use as part of their deferred payment contract and said that the 12 months that it took to sell their home was “a year of hell”.
Wainwright apologised for their experiences, but said 97% of customers were happy with the service, making it more popular than Disney or Amazon.
In another case study, Louis Houghton said he had been happy with the Purplebricks service. Of the three agents he asked round to value his property, the Purplebricks LPE was the least pushy and knew the area. In selling his home, he had saved up to £3,000 in fees.
Purplebricks was not the only online firm under the spotlight. Matthew Thomas, who tried to sell his Worcestershire property through Yopa, said that of six viewings, half had not turned up. He had repeatedly had to chase for feedback.
“When we needed the Yopa agent, he just wasn’t there … it was so lacking,” he claimed.
His property is now for sale with a local high street agent, and he is feeling confident.
Yopa, however, said it had been in touch with the vendor, who had received an offer of 95% of the asking price, which he had rejected.
The Advertising Standards Authority was represented on the show by Miles Lockwood, who said that one issue was that online agents were “not comparing like for like” when promoting their fees against full-service offerings.
He warned that the ASA is now proactively monitoring the “output of estate agents as a whole”.
Agent Noel Wood, of Peter David estate agents in Calderdale, Halifax, and Brighouse, told the programme of downward pressure on fees, including his own firm’s.
He said it could mean high street firms would be unable to afford good quality staff: “I worry that it is going to dumb down the industry,” he said.
Industry analyst Kate Faulkner told the programme that the honeymoon period with online agents “is over now”.
She said people should understand that many properties – she put it at 40% – do not sell, regardless of the type of agent they are on with.
She said: “Getting from offer to completion is a minefield – the resources and the skillset needs to be in place.”
Goldberg put it to her that with an online agent “The risk is that you have paid for a service and get nothing”.
Faulker replied that there were both bad online and high street agents: “With a traditional agent who is not very good, if they do not sell, you have paid nothing. That is where the reality is beginning to set in.” In the programme this was described as a key difference.
The programme attracted feedback as it went out live, including one text which said: “78% conversion rate is based on SSTC … properties not actually sold.”
The figure of 78% used in the programme contrasts with the 88% that Jefferies says CEO founder Michael Bruce cited in a Radio 4 programme in October 2016, when he is said to have claimed that 88% was the proportion of listings sold within ten months.
Yesterday’s programme can be found at http://www.bbc.co.uk/programmes/b09qdc1