The real estate market is experiencing a shakeup from a range of new entrants who use technology to cut cost and make services more efficient.
First we saw start-ups like OpenAgent move in the take the pain out of choosing a real estate agent. Then websites emerged that help homeowners sell their homes without an agent.
Over the past five years, an interesting new hybrid model of estate agents has emerged in the UK which offers more service than “for sale by owner” companies, but less than traditional, full-service real estate agents. And companies following this model are growing fast.
One of these, Purple Bricks, has just launched in the Australian market. Its key message is that you can sell your home at a far lower cost than using traditional real estate agents.
In Australia, it will charge you $4,500 to sell your home by private treaty and $5,325 by auction. That’s a set fee and unrelated to the value of your home. For the average Australian property, this compares to around $11,000 in agent’s commission plus $2,000 in marketing, which amounts to a total cost of $13,000 to sell your property. This is a whopping savings of $8,000 for the average property, compared to a traditional real estate agent.
Try our real estate commission calculator to assess what commission you are likely to pay a real estate agent in Australia.
Purple Bricks’ services include a home value appraisal, creating a floorplan and description for your online advertising, professional photos and advertising on realestate.com.au, domain.com.au, as well as Purple Bricks’ own website.
Its face-to-face support is offered through a “local property expert” who’s either be a Purple Bricks franchisee or a local real estate agent. These experts, however, do not have an office. They work remotely and come to your home.
So before you jump in and sign a hybrid agent, here are some pros and cons to consider.
Contracts: With Purple Bricks you are not locked in to any exclusive agency agreement or time period. That means you won’t be stuck with an ineffective agent that you can’t get rid of.
Level of access:Purple Bricks is open when other real estate agents are closed That’s because viewings can be arranged, offers made and sales agreed on 24/7 via its website. You can also see how your property is performing at any time and receive feedback immediately after viewings on its online platform.
Flexibility:Purple Bricks’ online platform allows you to change your property advert instantly. You can upload and edit new photos and change your price or details when you want to.
Communication:Sellers and buyers are kept at arm’s length by traditional real estate agents during the sale. Purple Bricks, however, enables sellers and buyers to communicate directly with each other through its online platform.
Post sales:Purple Bricks also supports service sellers navigate the conveyancing process – the process of legally and correctly transferring the property from one owner to another. However, it appears that the process does require a lot of work to be done by the sellers themselves, or their lawyers.
Failure to sell:Purple Bricks will charge the seller whether the property sells or not. This means that if sellers don’t get an offer they are satisfied with, they must still pay the fee of $4,500 or $5,325. In Australia, 20-25 per cent of properties typically change agents or are removed from the market. So the sellers of these would still need to fork out money to Purple Bricks’ fee. In contrast, a traditional full service agent is only paid if the property is sold and the fee comes out of the proceeds of sale.
Viewings and open inspections:With Purple Bricks, potential buyers must make an appointment to view the property. But in Australia, most buyers look for open homes on real estate websites and then turn up to view the publicly available open home, usually on a Saturday and often during the week.
In addition, Purple Bricks’ local experts don’t conduct open homes unless you are having an auction. If you are selling by private treaty, you will need to conduct the viewings yourself. But you can get assistance from your local Purple Bricks property expert for an additional $385, bringing the total cost of this option to $4,885.
If you decide to go it alone on the inspections, there’s the risk that you may not have the experience, skills or temperament for the task. Potential buyers may also try negotiate you down because they know most private sellers are inexperienced.
On the other hand, open inspections are “business as usual” for full service agents. They will know what works and doesn’t. They are also likely to keep their emotions out of the process and will not be offended by any criticism of your property.
You get Purple Bricks’ agent:That means you can’t rely on word of mouth or fully verified reviews from OpenAgent’s clients. You also can’t interview a range of agents to asses who’s best for you, based on experience, track record and other important criteria.
Incentives: Purple Bricks’ local property experts’ pay is based on listing the property for sale, not for actually selling it. This means the expert could be very aligned to sign the seller up to a listing, but may not very incentivised to help after this point, through the actual selling process. In contrast, a full service real estate agent’s fee is tied to making the sale and the agent receives more if he or she gets more for the property.
Purple Bricks’ local property experts are also not paid very much for each real estate listing, which means they must focus on doing many “in person” appraisal appointments, which leaves little time to help their clients who are already on the market.
Agent experience:Purple Bricks’ model, which focuses on a very high volume, does not typically attract the most experienced, qualified agents to become local property experts. Instead, it typically attracts people with one to three years’ experience. This means that while sellers have support from the local expert, they may or may not be getting the best or most experienced advice available through the process.
Track record:At this stage it is unproven as to whether hybrid agencies deliver great outcomes for sellers. Critics of Purple Bricks in the UK say that the company does very well at getting properties listed, but has a very poor track record of getting properties actually sold. They estimate it only sells 34 per cent of the properties it lists.
Price: An experienced agent might be able to skilfully negotiate a price for your property far higher than the commissions you may save through Purple Bricks.
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.