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Reviews - Agency complaint about Purplebricks upheld by watchdog

The Advertising Standards Authority has upheld a complaint over a Purplebricks website statement featuring testimonials from clients; the complaint was made by a rival agency. 

Because of the high level of interest in Purplebricks across the industry, Estate Agent Today is reproducing below details of the ASA’s processes in reaching its conclusion - so this story is a ‘long read’ but an interesting one for most agents.

The controversy surrounds wording on the reviews section of Purplebricks.com in July last year, featuring nine testimonials from consumers including claims of how much they had saved in fees by using the hybrid agency.

The first three testimonials stated “Mrs Kay, Blackburn, March 2016. Fees saved £5,682”; “Mrs Roach, Bournemouth, March 2016. Fees saved £3,702”; and “Mr Penfold, Edington, March 2016. Fees saved £7,302”.

These testimonials were at the centre of a complaint lodged with the ASA by Arun Estate Agencies Ltd challenging whether the Fees Saved claims were misleading and could be substantiated.

Purple Bricks Company Ltd, trading as Purplebricks, provided the ASA with information which showed the sale prices achieved by the individuals in the testimonials.

The data confirmed that - based on an assumed estate agent commission of 1.8 per cent of the sold price of a property compared to Purplebricks’ fees - Mr Penfold would have saved the amount stated in the ad, and Mrs Kay and Mrs Roach would both have saved slightly more than was stated in the ad.

In relation to the use of the assumed estate agent fee of 1.8 per cent Purplebricks said that very few agents stated their commission up front; Purplebricks said it had tried to find other agents’ commission rates but were almost always told that this would not be revealed until after a valuation had taken place.

The agency said agents tended to charge different clients different commission rates, and some operated on a ‘hyper-local’ basis, making it difficult to find out precise fees charged by agents in different areas of the country. Purplebricks also said most sellers would get a valuation and a quote for fees from three estate agents before choosing which to instruct.

For those reasons, they had based their assumed estate agent fee on the results of a customer survey they had conducted.

This survey - sent to all individuals who had sold properties through Purplebricks between May 19 2015 and July 7 2016 - asked respondents to “select the level of commission you were quoted if you had your property valued by a traditional high street estate agent”.

Out of 2,308 respondents, 1,805 had indicated the level of commission they were quoted. Purplebricks calculated the average commission quoted as 1.5 per cent for both the 81 respondents in London and the surrounding area (defined as the London postcodes N, SE, SW, EC, E, WC, W and the areas of Twickenham, St Albans, Watford, Ilford, Hemel Hempstead, Enfield, Sutton, Luton and Bromley), and to the 1,724 respondents outside London.

Purplebricks said its calculations were based on the assumption that the commission rates would exclude VAT. It added that it was the standard convention among high street estate agencies to quote VAT-exclusive prices, so it believed it was likely that the quotes respondents had received for commission rates would not have included VAT.

Purplebricks told the ASA that the findings of its survey were supported by evidence from independent parties.

This included the Citizens Advice website stated that estate agent commissions were “usually between 1.5 and 2.5 per cent” and an article on YourMoney.com stating that the “average high street fee is 1.5 per cent ... but charges can be as much as 3.0 per cent”.

Purplebricks also referenced a 2011 Which? survey and information from a national conveyancing firm referenced during the course of a previous ASA investigation.

Purplebricks said the reference in the survey to “traditional high street estate agents” would be understood by consumers to cover all estate agencies with a high street office, excluding online or hybrid estate agencies without high street offices.

The agency explained to the ASA that the service it offered for their fixed fees included the same services offered by traditional high street estate agencies, although their services were available outside of estate agents’ usual hours of operation.

Purplebricks said it believed its advertising was not misleading but said that for the avoidance of doubt they had made some amendments to the web page.

In upholding the complaint, the ASA says that the Fees Saved claims appeared on the Reviews web page of Purplebricks’ website in testimonials featuring quotes from named individuals, an image of their property, the town or area in which the property was located, a month and year, the days-to-sell and percentage of asking price. 

The ASA conclusions reads:

“We considered consumers would understand that the testimonials related to the specific experiences of individuals who had sold their properties through Purplebricks, but that those experiences were broadly representative of the experiences of Purplebricks customers more generally.

“With regard to the Fees Saved claims in particular, we considered consumers would understand the claims to relate to savings the individuals had made on the cost of estate agent fees by selling their property through Purplebricks, compared to the amount they would have been charged by other estate agents. 

“Given that the testimonials related to properties sold in specific areas we considered that consumers would expect that the comparison between Purplebricks’ fees and those of estate agents would relate to the fees of estate agents in those specific areas.

“We acknowledged the evidence provided by Purplebricks in support of the three testimonials. However, we were concerned that the evidence provided by Purplebricks was not adequate to support the basis of the Fees Saved comparison in the ad.

“We noted Purplebricks’ explanation that the comparison was against the fees charged by traditional high street estate agents. While we considered consumers would understand that the comparison was made against fees charged by other estate agents, we considered it was not clear from the ad that the comparison was being made specifically against ‘high street’ estate agents.

“We understood that the service Purplebricks provided was largely similar to that provided by ‘high street’ estate agents. However, we understood it was standard practice for ‘high street’ estate agencies to conduct viewings on behalf of property sellers as part of their fee, whereas Purplebricks charged additional fees if property sellers wanted an agent to conduct viewings on their behalf. We considered it was not clear from the ad that the service provided for Purplebricks’ fee was different to that of ‘high street’ estate agents.

“We next considered the evidence Purplebricks had provided in support of their use of a comparator ‘high street’ estate agent fee of 1.8 per cent of the sold price of the properties. We had some concerns about the adequacy of the survey as evidence to support the figure of 1.8 per cent in calculating the Fees Saved claims in the ad.

“We noted that Purplebricks had added 20 per cent VAT to the 1.5 per cent average calculated from their customer survey, because they believed it was likely that the quotes respondents had received for commission rates would not have included VAT.

“However, we noted that because the survey question did not make a distinction between VAT-inclusive and VAT-exclusive quotes, it was not possible to determine whether respondents were referring to VAT-inclusive or -exclusive prices. We therefore concluded the average figure of 1.5 per cent based on the results of the survey, and the 1.8 per cent figure used in Purplebricks’ Fees Saved calculations were problematic.

“Additionally, we understood that property owners often approached more than one estate agent for a valuation, and to find out the fees they charged, but noted that Purplebricks’ survey did not take into account that respondents may have received a range of quotes.

“Furthermore, the survey had been carried out with regard to geographical areas based on Purplebricks’ fee structure of charging £798 on properties outside London and £1,158 on properties within London and the surrounding area. As referenced above, we considered that in the context of testimonials which referred to the specific localities of the featured properties, consumers would expect the Fees Saved claims to be based on fees charged by estate agents in the specified areas, rather than on an average calculated from the broad geographical areas defined by Purplebricks.

“With regard to the additional sources which Purplebricks considered supported the findings of their survey, we noted that we had previously concluded that the Which? survey and information from the conveyancing firm were not adequate to support an average commission figure of 1.5 to 1.8 per cent. We further considered that because we had not seen the source of the figures stated by Citizens Advice and YourMoney.com, they were not adequate evidence in support of Purplebricks’ average commission figure of 1.8 per cent including VAT.

“In the absence of information in the ad about the basis for the savings claims, including the type of estate agents against which the Fees Saved comparison was being made, the differences between the services offered by Purplebricks and the comparator estate agents, and because the evidence was not adequate to support an assumed comparator fee of 1.8 per cent of the sold price of a property, we concluded the Fees Saved claims in the ad were misleading to consumers and had not been substantiated.

“The ad breached CAP Code (Edition 12) rules  3.1  (Misleading advertising),  3.7  (Substantiation) and  3.33  (Comparisons with identifiable competitors)."

The very final paragraph of the ASA ruling reads:

“The ad must not appear again in the form complained about. We told Purple Bricks Company Ltd trading as Purplebricks to ensure that ads which made comparisons provided sufficient information about the services being compared to ensure that consumers would not be misled about either the advertised service or the competing service. We also told them to ensure they held adequate evidence to substantiate the basis of comparative claims.”

  • Simon shinerock

    The smoke is blown away, the mirrors shattered, PB's claims are ripped and tattered. I really do have grave concerns about this company, they have raised a lot of money based on claims which I don't feel are realistic. Most significantly I don't think they are a 'tech' play, I think they have basked in the reflected glory of tech stocks and their valuations. Neither are they an SSAS model accruing regular monthly income long after the service costs have been paid. I believe PB to be a business model which, like traditional estate agency, depends on the quality of their people, in this case the LPE's. The nearest comparison I can think of would be a life Assurance company in the 80s pre regulation. The problem is that building and sustaining such a large sales force in a compliant way is no easy task and after the sizzle of the new career and the new proposition begins to fade, who knows what mal practices may creep in as salespeople try to keep their figures up in the face of a less than shiny reality.

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    Not often I agree a 100% with you Simon but today I do.

     
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    Sounds like the ASA are trying to satisfy both sides of the argument. A very poorly thought out decision in my view which will help no one.

  • Paul Grimes

    Oh I don't know. PB will feel their knuckles well and truly rapped. Ooh.

    Bet House Simple are quaking in their boots.

  • Chris Mervyn

    Why not a clearer distinction what they offer v what traditional high street agents offer? Any agent involved in a chain would tell you that despite the claims they also don't have an after sales dept (have you tried speaking to anyone!) Yet another difference. These are not Estate Agents - they are Marketing Agents. Sooner the public is made aware (strongly) - the better for the industry. https://plymouthpropertynews.wordpress.com/2017/06/26/buy-now-but-pay-later/

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