How does Purple Bricks work? - Articles - OpenAgent

How does Purple Bricks work?

Zoe Pointon

australian home

Purple Bricks is a low cost real estate agency model, launched in 2013. It has some traction in the UK, it’s home market, and has announced entry into the Australian market for Spring 2016.

The key message behind Purple Bricks is that a house can be sold for much cheaper than using a traditional real estate agent. The launch prices for Purple Bricks in Australia are $4,500 for a sale by private treaty, and $5,325 for a sale by auction.

Read: Why you need an agent to manage the sale of your house

How does Purple Bricks work for the home seller?

The process for a seller starts by booking a property appraisal. This can be done online. As of launch date it looks like there is no way to do this over the phone. Using an online form, the seller can enter in their address, choose a day and time, and confirm an appointment with their “Local Property Expert”.

A Local Property Expert is someone who works for Purple Bricks, basically like a franchisee or local office of any other real estate agency (e.g. Ray White, LJ Hooker, etc). One difference between Purple Bricks and a traditional real estate agency is that Purple Bricks Local Property Experts do not have an office, they work remotely and come to the seller’s home for any face to face interactions.

At this appraisal appointment, the seller needs to work out whether they would like to use Purple Bricks to sell their property. The Local Expert will create a floorplan of the property and give the seller an idea of what the property may be able to sell for in the current local real estate market.

Purple Bricks will charge the fee to the seller whether the property sells or not

If the seller chooses to go ahead and use Purple Bricks to sell their property, they will be charged $4,500 for a sale by private treaty and $5,325 for sale by auction.

Another difference between Purple Bricks and a traditional real estate agent is that Purple Bricks will charge the fee to the seller whether the property sells or not, a traditional agent is only paid their fee if they sell the property, and the fee comes out of the proceeds of selling the property.

What does the Purple Bricks fee include?

The Purple Bricks fee includes the following services:

  • Support from your Local Property Expert all the way until the property is sold (more about this below)
    Professional photos
  • A floorplan and description for your online advertising
  • Advertising on realestate.com.au, domain.com.au, as well as Purple Bricks’ own website
  • Access to a sales support team (over the phone or chat) for help after an offer has been accepted

After the appraisal appointment, the Local Property Expert will prepare an advertisement of the property. This will be reviewed and approved by the seller and then made public on realestate.com.au and domain.com.au.

Prospective buyers are able to view properties for sale and if they are interested, use the Purple Bricks portal to make an appointment to view the property. If the seller has chosen the property auction option, then these viewings are assisted by the Local Property Expert. If the seller has chosen the Private Treaty option, then the viewings are done by the seller themselves. There is an option to have assistance from the Local Property Expert with this option, for an additional $385, making the total cost for this option $4,885.

Another difference to selling with a traditional real estate agent is that under the Purple Bricks service, those looking to buy a house must make an appointment to view the property. In Australia, most buyers look for open homes on real estate websites like realestate.com.au or domain.com.au and then turn up to the publically available open home (which is usually on a Saturday, when most buyers are out and about looking at properties).

Once a buyer has decided that they would like to make an offer on a property that is for sale with Purple Bricks, the buyer will submit their offer on the Purple Bricks’ portal. It seems from a review of the Purple Bricks’ website that offers are also accepted on the portal.

Once an offer has been accepted, Purple Bricks provides a support service to help the seller navigate the conveyancing process (which is the process of legally and correctly transferring the property from one owner to another). However, looking at the different parts of the post-sales process and who is responsible for them, it appears that the process relies heavily on work done by the seller themselves, or their lawyer.

australian home

Breakdown of responsibilities in the post-contract phase of sale under the Purple Bricks model

The Seller is responsible for:

  • Entering lawyer details on the online platform within 24 hours of agreeing to an offer;
  • Ensuring the lender has all the relevant information to proceed with the loan;
  • Ensuring the lawyer has all the details and paperwork they need;
  • Chasing the lawyer for paperwork and progress;
  • Agreeing exchange and settlement dates.

The lawyer or conveyancer is responsible for:

  • Ensuring the lender has all the relevant information to proceed with the loan (both buyer and seller lenders)
  • Advising and supporting the seller in relation to problems arising in building & pest reports, strata inspection, or mortgage position
  • Obtaining leases and legal documentation as well as liaising with the buyer’s lawyer
  • Agreeing exchange and settlement dates

Purple Bricks’ support team is responsible for:

  • Ensuring that the seller has put their lawyer’s details onto the platform
  • Ensuring that the mortgage arrangements are in place
  • Advising and supporting the seller in relation to problems arising in building & pest reports, strata inspection, or mortgage position

Purple Bricks reviews and what sellers think of the service

Purple Bricks, and several other models similar to Purple Bricks in the UK (“Hybrid or Online Estate Agents”), have grown quickly over the last 3-5 years. In total, these kinds of agents help around 5% of sellers in the UK.

The strong growth and key reason for people using Purple Bricks has been driven by the competitive price charged for the service (less than 1000 pounds in the UK outside of London). In Australia, the price of the service ranges between $4,500 and $5,325. For the average Australian property, this compares to around $11,000 in agent commission plus $2,000 in marketing, or $13,000 total price to sell a property. This represents a saving for the average property of approximately $8,000 when compared to a traditional real estate agent.

Read: What commission rates to expect when selling property

Considering selling a house with Purple Bricks?

There are several criticisms of Purple Bricks and Hybrid Estate Agents that potential sellers need to be aware of.

1. You’ll be charged a fee, even if your property doesn’t sell

Purple Bricks charges the customer their fee regardless of whether the property is sold or not. This means that if the seller does not get an offer they are satisfied with, they must still pay the fee of $4,500-$5,325. In Australia, 20-25% of properties change agents or are removed from the market, which means that 20-25% of sellers will need to pay the fee without actually selling their property.

2. Local Property Experts or agents are paid upfront, not when your home sells

The Local Property Experts are paid based on listing the property for sale, not for actually selling it. This means the Local Property Expert is very aligned to sign the seller up to a listing, but is not very incentivised to help after this point, through the actual selling process.

3. Critics estimate Purple Bricks has a poor and slow track record of selling

In June 2016, Anthony Codling, an analyst at global investment bank Jefferies disputed Purplebricks’ claim of a 77% sale agreed rate. Codling stated that 1 in 3 home sellers paid the full fee but were actually unsuccessful in selling their home.

These figures were revisited again in July 2016, with Codling noting in correspondence with investors, “due to time lags in the Land Registry Database, we only looked at properties which were registered as sold on or before March 31 2016. Overall we were able to trace 14 per cent of the properties classed as ‘sold’ between October 29 2014 and March 31 2016 to the Land Registry database.

Codling continued: “We hope that for their [Purplebricks] customers the saying ‘all comes to they who wait’ is true. The lucky 14 per cent who have sold their homes waited on average around 4.5 months between selling subject to contract and actually selling. For the rest the wait has been around 6.5 months so far and the clock is still ticking.”

4. Local Property Experts aren’t paid much for each listing

The Local Property Experts are not paid very much for each real estate listing, which means they must focus on doing many in-person appraisal appointments (some critics claim more than 5 per day), which leaves little time to help their clients who are already on the market.

5. You probably won’t get the very best local agents

The model which focuses on a very high volume does not typically attract the most experienced, qualified agents/realtors as Local Experts. This means that while the seller has support from a Local Expert, they may or may not be getting the best advice available through the process.

So while the price is very attractive, the different way of selling property also comes with some warnings from its critics.

So what are consumers saying?

On their Australian website, Purple Bricks promotes that it has more than 7,000 positive reviews of the service on Trust Pilot, which is a popular reviews site in the UK. However, the company has come under scrutiny from some industry commentators in the UK for manipulating their reviews, and suggest that people look around at their UK Facebook reviews and Google+ reviews to get a more balanced view of the seller experience.

At OpenAgent we welcome consumer choice: our mission is to make it easy for Australians to sell their property, however they like.

In Summary

Purple Bricks is a Hybrid Estate Agency. This means the level of service they offer to sellers is more than ‘for sale by owner’ but less than a traditional, full-service real estate agent. Purple Bricks has designed a very cheap way of selling properties in the UK, and have brought this to Australia. Sellers are usually attracted to the cheaper cost vs. a traditional real estate agent, but should also be cautious about the implications of going with a lower level of service through the process of selling their property.

At OpenAgent we welcome consumer choice: our mission is to make it easy for Australians to sell their property, however they like. We look at Purple Bricks and other Hybrid or Online offers with the seller’s best interests at heart and will watch with interest to see whether they are delivering great customer outcomes.

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