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TODAY'S OTHER NEWS

Emoov debacle ‘could mean the end of upfront fees’ says online agent

Purplebricks is understood to be pondering the best way to assist victims of the collapse of Emoov without committing money for what is essentially a worthless set of listings.

Purplebricks’ chief executive Michael Bruce has indicated that his company “will do what we can to help all these customers and ensure they’re not out of pocket” but it is thought this will not be in the form of purchasing the client book.

Emoov clients are thought to have almost wholly paid their fees upfront to the company, with that money spent or accounted for in the losses run up by the firm before its former chief executive, Russell Quirk, called in administrators on Monday.

One way would be to transfer the remaining Emoov customers to Purplebricks’ books free of charge, although it is thought that may require the properties being revalued.

Many traditional agents have for some weeks been approaching Emoov and Tepilo sellers in a bid to secure their business, while prominent consultant Richard Rawlings has already made a social media video explaining how existing agents can approach stranded Emoov clients whose details are available via TheLeadHub.

Meanwhile the head of an online estate agency says the Emoov debacle has effectively killed the upfront fees business model. 

Rob Bryer, founder of The Good Estate Agent, says that he anticipates Emoov’s collapse this week is just the start of things to come.

“The other fixed fee upfront models will follow shortly as they struggle to gain stock in a difficult market. The investment money will dry up and the pipeline will be non-existent.

There are no agency disruptors out there. All they have done is change the pricing model but it’s still the same business” he says. 

Describing the approach of many online agencies as “a lot of hot air and marketing spend” he says that Emoov is now “a worthless business with nothing but liabilities to pass on.”

Bryer, who says his firm has some 50 franchisee estate agents operating in the field across the country earning up to £18,000 a month, says the Emoov debacle has resulted in catastrophe for its staff. “My inbox is already full of Emoov CV’s” he claims.

“We setup The Good Estate Agent [in 2010] without investment or borrowing. As the first true hybrid agency we found lower fees did not work. This is an expensive business and with portal costs such as Rightmove and Zoopla high revenues are required just to stand still” he adds.

“Traditional estate agents are not greedy. Most just get by even in the best of markets so pressure on fees is not good for anyone.”

Two years ago Bryer advertised franchises at his agency from £5,000 upwards.

The Kent-based firm provides what it describes as “full training, access to an online property and applicant management system, website, telephone and email support” and “takes care of the major brunt of the work such as the administration, Rightmove and Zoopla advertising as well as telephone and email enquiries” - leaving the franchise owner with all the time to go out and get the business.

  • Andrew Stanton Estate Agency Insights And Strategies

    If there is enough pressure from the 2,000 plus vendors who have jointly lost over £200,000 of upfront fee, plus any upfront Tepilo lost fee, and Purple Bricks had to move to a no sale no fee model that would be game over.

    As PB get 100% of fee on every instruction at present and their average fee is now around £1,300. If they moved to no sale no fee they would only get paid on 50%, as they list 10, sell 7, cancel 30% and exchange on around 50%. And they would have the 16 week wait from point of sale to money in on completion that most agents suffer.


    The only reason PB keeps rolling on is that it has zero liabilities, LPE's who are 'sel employed' and lots of cash rolling in, the fact they never make profit seems to be a non factor, but in time investors will want a dividend on their shares.

    Given that market analysts including Motley fool who comment on the Purple Bricks 58% share price drop this year since Jan, things are not rosy at all.

    As Roland Heald from The Motley Fool put it today in his article ' The Purplebricks Group (LSE: PURP) share price has fallen by 58% so far this year.

    Should we ignore mounting losses?

    My colleague Graham Chester reviewed Purplebricks’ half-year trading update recently. I agree with his view that we don’t yet have enough information to know whether the firm will hit its growth targets this year.

    What I do know is that the near-term outlook for the firm seems to be worsening. One year ago, analysts expected the firm to report earnings of 2.3p per share on sales of £169m in 2018/19. Today, forecasts indicate a loss of 10.8p per share on sales of £173m.

    It’s a similar story in 2019/20. Forecasts for earnings of 10.4p per share have been replaced with an expected loss of 4.6p per share.

    One reason for these downgrades is that the group’s international expansion has been ramped up. In the short term, this means that profits from the UK business are being swallowed up by operations overseas.

    Is PURP a genuine disrupter?

    If the group’s global expansion is successful, this business could become a genuine disrupter, like Amazon.

    Personally, I don’t think this is likely. Purplebricks’ business model seems more like evolution than revolution to me. Its sales and property listings still depend on a small army of estate agents (630 in the UK). The only difference I can see is that they don’t have offices.

    Although the firm’s fixed-fee model is different to a traditional commission rate, I believe mainstream agents will be able to adapt their pricing to become more competitive if they need to.

    Purplebricks may well cause estate agents’ profit margins to fall. But I don’t think it’s a truly disruptive business. For this reason, I view the shares as expensive and risky.'

  • icon

    Mostly overpriced in the first place... that’s the only way they get them on.... 9/10 of the Emoov sellers are on another planet with their expectations as a result... poor or no initial price advice...

  • Simon Shinerock

    For every action there is an equal and opposite reaction. You can’t provide a quality service on the cheap, PB et al haven’t proved this, it was proved by Seekers in the 80s all they have done is extend a failed short term business model to a wider audience via expensive media spending. The net outcome next year will be agents leaving the business (well it’s overdue a cull anyway) while those agents who remain will increase their fees

    James Robinson

    Or as Ruskin said in the 19th century:
    There is hardly anything in this world which some man cannot make a little worse and sell for a little cheaper, and the people who consider price only are this man's lawful prey.

     
  • icon

    PB have just increased their base line fees from £849 to £899 in our area and I’m sure as time goes on it will continue to increase just like Tepilo did and look what happened to that shambles of a company! I think we should all be contacting our local papers/radio stations asking if they would be interested in running a story on the dangers of losing your money to upfront payanyway cowboys in light of the Emoov story where innocent victims have collectively lost a considerable sum! Hopefully this will make people think twice before instructing ‘Pay Up Front’ Agents. Ahh CONmisery!

  • icon

    So on an MA when competing with the likes of PB an additional argument is if they go out of business you lose everything.

    Although restricted instructions is bad for all of us, it is worst still for the stack'em high and sell'em cheap brigade who rely on volume. For that reason I hope it continues just a little longer. PB will have a stress point somewhere.


    For those vendors who thought they saved £300 on estate agency fees but lost £3000 on the sale of their property I have no sympathy.

  • Michael Riley

    PB gets a hard time. The more I find out about them the more impressed I am with the level of detail and execution in their business. It is extremely impressive....

    Agreed, it will most likely end in tears.... but there is plenty of gas in their tank yet.

    Its also not impossible their "true " business plan / model is yet to be revealed fully revealed.

    They have provided a much needed wake up call agencies, making them sit up and really have a good think about how they run their businesses and what is important (or not) to the customer.

  • Bob Morris

    When will this country wake up and realise it costs to buy and sell. Lets use what europe and north america use. Buying and selling agents. Estate Agents work together. Split fees. So when a cheap company comes along who the hell wants to split £1 commission. For years I have watch many cheap estate agents come and go, rise and fall. It is expensive to run an estate agency. I'm just amazed how many time sinvestors are convinced to put money into a company than needs fed with more and more investors.

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