Purplebricks has had two complaints about it upheld by the advertising watchdog.
A third complaint was not upheld.
The complaints were to do with the savings that Purplebricks claimed first on TV and then on its website that it could make for customers.
The first claim was made in a TV advert which showed an agent at a client’s property, and saying: “You could save thousands.”
Small print stated “Based on average estate agent’s commission – Source: Which? survey 2011.”
The website said the average saving was £4,158, with text saying that this was based on Purplebricks’ average sale price at that time, and the UK “average commission rate of 1.5%”.
The three complaints were:
- Whether the TV advert claim of “you could save thousands” was misleading. The complainant also noted that the Which? survey was over five years old.
- Whether the claim on the website that the average customer saving of £4,158 was misleading and could be substantiated.
- Whether that claim could be verified
For readers puzzled as we were about the difference between the second and third complaint, the ASA told us that “substantiation” alludes to the fact that an advertiser has to hold substantial evidence for their claim. They do not have to share this publicly but must be able to produce it on request. Verification comes into play when a claim is comparative, eg: “You can save X amount more with us than company Y”. If you are making a comparative claim, advertisers must make their evidence for this clear to the consumer.
Purplebricks told the Advertising Standards Authority that it had used two sources to establish the national average estate agent fee.
There was the Which? survey it had used for the TV advert. This had come up with a national average of 1.8%. Purplebricks said the 2011 Which? survey was still the most recent conducted by an independent third party.
For the advert on its website, it based its claims on an email sent in May 2016 from a large well-established conveyancing firm which operated nationally other than in London, and which put the average fee between 1.1% and 1.7%.
From this, Purplebricks had calculated a national average fee of 1.5%.
Purplebricks said that, in contrast, they charged consumers a fixed estate agency fee of £798 including VAT outside of Greater London, and £1,158 including VAT within Greater London.
To demonstrate the average property price, Purplebricks provided data sourced from a third-party property advertising website which stated that the average asking price of a property in the UK was £303,190.
Purplebricks said it had compared its fee in comparison to the average commission charged by high street estate agents in relation to a property price of £303,190, which demonstrated that consumers “could save thousands” or, more specifically, £4,158.
Clearcast told the ASA that the 2011 Which? survey was the only official survey conducted, and was adequate to support the claim. Clearcast had advised Purplebricks that it would need to update its advertising once a new survey became available.
The first complaint was not upheld.
The ASA said viewers would understand they could save a significant amount of money.
While it had concerns over the Which? survey, it did not consider that a communication from a conveyancing firm was adequate to demonstrate the national average commission.
A property valued at £300,000 would yield an estate agent commission of £3,000 at a 1% fee, which the ASA said was “demonstrably” more than Purplebricks.
It said the advert was unlikely to mislead.
However, it upheld the next two complaints.
The ASA said it had not had adequate evidence to show that customers could save £4,158 when selling a property through Purplebricks, in comparison to a high street agent’s 1.5% fee.
The ASA noted: “Purplebricks had also not provided any of their sales data to demonstrate their average fee, how it was calculated, and whether the higher London rate or any optional fees were reflected in their saving calculation.”
The ad must not appear again, with ASA telling Purplebricks to “ensure that they held adequate substantiation for their savings claims, and to ensure that any comparative claims with identifiable competitors were verifiable”.
Analysts give shares a ‘buy’ rating
Analysts at Citigroup started covering the business yesterday with a ‘buy’ recommendation and a 200p price target – exactly double the price when Purplebricks launched on the stock market last December.
Citigroup said Purplebricks has reported maiden full-year results, delivering around 450% revenue growth, albeit from a low base.
The bank said it expects Purplebricks to deliver strong year-on-year revenue growth of about 136% in 2017, and to become profitable in 2018.
It said that while the majority of home buyers start their property search online, the online agency space had grown relatively slowly until Purplebricks started trading in 2014.
It said that Purplebricks has 60% market share of all online UK residential transactions, and total market share of about 1.2%, up from 0.4% in 2015.
Citigroup said it expects market share to rise to 2.8% next year and to 4.1% in 2018.
It added: “The business offers a number of add-on services, largely through partnerships, which we expect to help drive revenue per transaction going forward.”
Yesterday the shares ticked up 1p to 131p.
Purplebricks is due to issue a trading update to the City tomorrow.
Any financial penalties imposed on PB…?
if not then this leaves the door wide open, every time, for others to literally advertise whatever they like, safe in the knowledge that they’ll only ever get ‘please now take that down’ or ‘you’re not allowed to do that anymore’ ruling from the ASA.
This is like a playground for overgrown kids who haven’t learnt morals, honesty and integrity is.
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My original comment has been moderated… I note the final few words I wrote weren’t factual after all.
Wow, PIE! You’re quicker and more efficient than the ASA! 😉
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To coin a phrase – FAKE IT ‘TIL YOU MAKE IT.
I hope the complainant appeals the decision or re-submits. There are some fundamental flaws in the decisions and on the evidence and manner in which they were reached.
The most recent independent (and more comprehensive) published data is by MyHomeMove Conveyancing in this very publication showing a considerably lower figure than that claimed by PurpleBricks (and most other call-centre agents) and was 1.44% including VAT
There can be no savings calculated unless the number of homes actually sold is disclosed by PB as PB earn a fee for every instruction not sale, so the average cost per customer for PB is circa £1,000. However, EVERY PB customer pays this whether they sell or not*.
The calculation used, then, is not a true or fair like for like. PB’s advertised “savings” compares a PB customer who sells with a ‘no sale, no fee’ (NSNF) customer who has sold. However, to be a fair and accurate comparison, the the calculation should be the average cost per customer who pay a fee. E.g. If PB lists 1,000 properties their customers will pay 1,000 x 1,000.
E.g. (1,000 x 1,000)/ 1,000 = 1,000 average cost per customer
However, if the average NSNF agent lists 1,000 properties, only a certain percentage will actually end up paying any fee (say, 25%).
To calculate the true cost per customer for the NSNF model, requires the true average house price and an accurate current average fee. The HMLR figures show that, currently the average property SALE price (not asking price as conveniently used by PB) is £216,750 – source http://bit.ly/2cvrfQT
So, if 1,000 customers list their homes but, say, only 25% go on to sell that sum is £216,750 x 1.44% x 25% = £780.30 per listing customer.
If 40% go on to sell, the cost per customer who lists on the NSNF model is £1,248.48 per listing customer etc. Compare that to the advertised claims by PB
The savings, when using the correct method are not anything even approaching what PB and many similar business models are claiming.
The ASA is no more effective than an annoying fly to most of these large firms and has no teeth. The best way to complain is to complain to trading standards for the area the firm is based (for national firms or, to the local TSO’s for smaller firms). They do have teeth and can prosecute under CPR (Consumer Protection Regulations)
*PB advertising also claims that every customer will sell for the £1,000 fee whereas, this claim is a fee for marketing, not selling.
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Excellent synopsis Chris. I’d like to steal this and write to the ASA but using more colourful language. But as you observe, that’s probably a waste of everybody’s time!
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By all means use it Mark but, write to trading standards, not the ASA. They have the power to prosecute if CPR law has been breached which,the ASA rulings suggest may be the case.
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I couldn’t agree more Chris. If they wish to make a comparison claim against high street agents they should at the very least be made to say ‘you could save x amount (based on up to date data) compared to a traditional agent if you sell, or you could lose £798* if you do not sell’ (*£1158 in greater London).
There should be a campaign based on not misleading consumers. This is only the same as ‘your home could be at risk if you do not keep up the repayments on a mortgage or loan secured against it’.
Can we rally a campaign for ‘Fair Comparison Disclosure’?
Can PIE champion the cause?
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Many branch based agents in my area, where the average price of a semi is around 200k, charge a minimum fee of between £1750 and £2,000 plus vat on a ‘NO Sale, NO Charge’ basis.That falls in line with the recent estimated average agency fee outside London of 1% plus vat.
It appears to costs PB around £2,700 just to list a property!
How about PB saying something along the lines of:
Although it may cost PB around £2,700 just to list a property in the UK, due to the generosity of our ‘Investors’ who subsidise each and every listing to the tune of around £1800, we are able to reduce our fee to around £900 whilst we try and establish a foothold in OZ where our new fee will be similar to our actual cost of £2,700.
Question: What happens if PB run out of money in the UK?
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Chri Wood
I would be equally as worried that you only think 25% of the stock is going to sell…
No sale no fee has brought an obvious culture of overvaluing properties throughout the industry.
your assumptions prove this to be correct.
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TheHybridAgent
Chris Wood used 25% as ONE example of a business fee model. Certainly not his.
I reckon you’d be proud of an Instructions:Sales ratio even vaguely similar to that of his company.
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“No sale no fee has brought an obvious culture of overvaluing properties throughout the industry.”
B0110cks.
WINNING THE INSTRUCTION has done that. MASSAGING A VENDOR’S EGO has done that. THE “NUMBERS GAME” system has done that.
NSNF just means that poor Agents swallow the above hook, line and stinker.
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No fine. No penalty. No sanctions.
ASA……Heads gone
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I would have been bitterly disappointed if this comment had not been posted! ;o)
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Interestingly PB currently use different ‘evidence’ on their website for their ‘savings’ claim…
“£6,309: Source: Purplebricks customer survey of 109 customers who sold with Purplebricks between 19/05/15 – 07/07/2016 claiming average traditional estate agent commission quoted at point of property valuation was 1.5% against an average property sold price of: £414,815 £3,086: Source: Purplebricks customer survey of 1,489 customers who sold with Purplebricks between 06/09/14 – 07/07/16 claiming average traditional estate agent commission quoted at point of property valuation was 1.5% against an average property sold price of: £215,815”
The two different sales figures relate to London and then outside of London to reflect their different fee structure.
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It is about time the financial regulators looked into the whole process of what is going on with firms and ‘investments’ like this.
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No press is bad press. They’ll be lapping this up.
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We are now seeing ‘List it for £99’ operations. To reach a greater market share won’t PB need to drop to lower clients costs and increase advertising spend.
Maybe they could sell some DEFGHIJ or whatever share issue they are at.
For sure the budget message will be used against them and other budgets who claim to save people £housands, yet remain above £3-400
As more budgets come to the front to operate, more will cry out we’ll save you hundreds compared to PB, Tepilo, easyP, House Simple and YOPA’s.
But how low will listers go? £49??
WHICH also put out a report saying only 4 in 10 houses found on portals get bought. How do budget agents address the other 6 in 10 selling instances.
As such online budget only could cost clients upfront with no result. and even with result, poss cost sellers thousands
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Much as we dislike doing it we have already had to edit a couple of the comments on this story.
We know this topic raises very strong views but we must remind you that defamation can have serious consequences.
If what you write cannot be substantiated in a court of law it is best not to write it!
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I agree nick but…
isn’t this exactly what PB are getting away with Nick?
Defamation aside – if you cannot back up your claim then it shouldn’t be posted, written in an email, painted all over the internet or on billboards, TV, radio or in print.
It’s a shame it’s one rule for us…..
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Clarkuk
Your frustration is understandable – but EYE are exercising aa admirable and welcome duty of care to their ‘customers’ (that would be us…) by filtering out posts which could land the poster in deep doo-doo and also cause major problems for EYE itself.
As one who regularly enters the minefield with hobnail boots on, I am more than happy for one of my posts to be dumped in Room 101 than receive notification that Legal proceedings are being threatened.
The first time it happens, and no-one will want to post a single word for fear of reprisal – and then companies like PB WILL have ‘won’.
If you see or hear the lies, d@mn lies and plain porkies you refer to – REPORT them through the correct channels.
Who knows – one day, the perpetrators of billshuttery may get sick of being sent to sit on the naughty step and actually play fair…
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My only experience of PB (and I am sure others will say differently) is a work colleague selling via them
She paid , I think about £700 upfront and they sold for almost asking price after four viewings. The chain was straightforward, which i appreciate makes the whole experience easier.
Anyway in pure cash terms she saved about £3k if you took an average high street agents 1% commission. I m sure others will suggest that she would have received asking price if she had used a high street agent, but you will never know.
I think PB works well, when chain are simply and people are wanting to sell (divorce, job changes etc) and the buyer in my colleagues case, was a 100% cash buyer. Does PB work well in other circumstances, I am sure others will tell me not.
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I’ve only dealt with them once but so far the experience is not good.
I asked for chain details and they couldn’t even tell me anything about the buyer, they couldn’t tell me whether it was cash or mortgage, they had no details about the chain below them, I asked if they had proof of affordability in – they didn’t know, I asked when the survey was booked – they didn’t know. They then asked me to contact the LPE who couldn’t ‘remember’ as he was in the car. and it took 2 days for him to get back to me. In that time i’d chased the solicitors, got the memos established the chain, spoke to all the agents in the chain and had the survey dates relayed to me via the buyer who was on holiday at the time.
Admittedly this was only one sale but I don’t want to go through this everytime PB are involved.
they did tell me that their streamlined service saves time – probably by cutting out their middleman – or LPE as he’s called
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The ASA is not fit for purpose if you wish to see an offender prosecuted, they don’t do that and have no power fine. TSI should stop side stepping and telling everyone to complain to the ASA. If you were speeding in a car …. you wouldn’t be told to speak to the RAC or AA.
Are not some of these companies actually knowing full well what they are doing with their misleading statement? Is it not a case of “we can get away with it and when we get caught they’ll just ask us to rephrase, won’t cost us any money, so nothing to lose”, meanwhile reaping in the business advantage? I’m still waiting for someone to complain about HouseSimple!
Companies that start to use comparisons about there competitors and cost saving, know only to well what they are doing when they start to draw up their marketing campaign. Unusual to not run it past a lawyer before going live.
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Its a shame these companies are not forced to show if they actually do provide a good or poor service for the money. Maybe its about time that customer reviews are mandatory on their own web sites when they use the strategy to knock competitors. All reviews submitted via an independent body. Some bogus ones would get through but nothing like the real feel from the public. Being allowed to tinker with “samples” for bragging rights should be stopped, as they are produced to mislead. Some of the data is already there like instructions to fall through …. now that would be an eye opener!
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I would say Trust Pilot is a good Independant body to collect the data to show how good companies are performing.
Strange that not many high street agents don’t use review sites…
That would be quite interesting to see.
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“To demonstrate the average property price, Purplebricks provided data sourced from a third-party property advertising website which stated that the average asking price of a property in the UK was £303,190. They explained they had compared their fee in comparison to the average commission charged by high street estate agents in relation to a property price of £303,190, which demonstrated that consumers “could save thousands” or, more specifically, £4,158”
when did any traditional agent charge a % commission based on the asking price. The UK transaction average based on clean land registry data is currently £272,293.
The fee saving isn’t the end of the equation based on £272,293 and a current average price inflation vendors could be £9500 shy on price achieved using an agent who is reliant on the comparables method of valuation but does not have a volume of sales in an area to support their valuation
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