Purplebricks co-founder Michael Bruce says traditional agents sell only around 50 per cent of the homes that they list, so spend half of their income from commissions underwriting the costs of the home owners who fail to sell.
In a long and detailed podcast produced by Irish workplace compliance consultancy Legal-Island, Bruce - now chief executive of Purplebricks worldwide - says the traditional agents’ business model of no-sale no-fee is “fundamentally unfair.”
In the podcast he says: “No sale, no fee only benefits one person - that's the person that never sells. Therefore, everyone that does sell underwrites the cost of those who don't.”
Bruce tells listeners that if they look at a traditional agency “they sell something like around 50 per cent of what they take to the market.”
This is, incidentally, almost exactly the figure alleged by City consultancy Jefferies as being the proportion of homes sold by Purplebricks. In February this year an analysis of one month’s listings on Purplebricks Jefferies concluded that it sold 51.6 per cent of its homes within 10 months.
In this new podcast, Michael Bruce continues by saying: “If you're paying [a traditional agent] a £2,000 fee, £1,000 of that is underwriting the cost of the people who either don't sell or churn in the market. So, what we said is we want to offer something that's much more competitive, that's fair, that everybody contributes towards, that means that we can offer a much cheaper price.”
Bruce also addresses the claim made by some critics that the flat-fee upfront payment model removes any incentive for the agent to sell the property.
The Purplebricks boss says that his company’s Local Property Experts are “the very best people in the industry” who will only be successful “by seeing sold boards in their area” because every sold board spawns another two valuations.
“So, they live off sold boards. They earn more money when a property sells” Bruce insists.
He then counters his critics by saying it’s the traditional agent, not the hybrid flat fee agent, who lacks a real incentive.
“The reality is if you're an estate agent in a branch working for ... a corporate estate agency ... and you are currently incentivised by way of a commission, for every £10,000 you get more for a customer, you're lucky to be able to buy yourself one pint of beer for that incentive” he claims.
Bruce then adds: “So, the idea that they're getting thousands of pounds extra and they don't have an incentive to get the best price, all decent agents, their whole incentive is to sell a property for a customer and help get the very best price.”
Referring to recent data from the consultancy TwentyCi showing that online agents now accounted for some seven per cent of market share, Bruce went on to say: “We aren’t the most positively reviewed estate agent anywhere in the UK and we don't have the level of growth and success that we've got by not selling houses. We've got it through being very good and very successful at what we do.”
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What a load of rubbish. Assuming it were true that an agent only sells 50% of its instructions, for Bruce’s claim to be true none of the unsold 50% would go on to sell with another agent. The truth is it’s the agent that has to put their money where their mouth is. These days you have to pay for a EPC to go on the market anyway and the number of time wasters entering the market is way down on where it was in the past. Of course some people will go on the market and pay nothing but this is a marginal cost worth paying for the huge benefit of knowing your agent is only paid for results. And what about the thousands of Sellers who have paid Purple Bricks and sold through High St Agents, we do it all the time, where are the refunds? Where is the guarantee of service?
Your assertion that the number of "time wasters" is "way down" would appear to be contradicted by the next news item below this one. A staggering 61% of properties in London are now withdrawn unsold.
James Walsh, really? You put that down to time wasters do you
Simon Shinerock - I put it down to utterly unrealistic sellers. Sellers refuse to accept that the London market has declined significantly (and is falling still). I would say someone who refused to accept reality is a 'time waster' yes.
Well James, I accept the issue but it’s not really relevant to the PB proposition I don’t think and anyway, my point still holds, you should have been there in 1992 we had over 2000 unsold Instructions in Crawley alone and we charged a £300 up front fee plus 1/2%. I know a bit more now and recently I was preaching to my people about how to get price reductions using the 80/20rule, otherwise known as ‘The Pareto Principle’. I asserted that I could convert almost any vendor to a bottom up marketing strategy at 20% below their starting asking price if they were still on the market after three weeks. My son took me up on my claim and challenged me to perform this feat on his most difficult vendor who he considered a time waster. It was actually an elderly couple and I have to say the wife wore the pants, I agreed with all her moans and complaints, actually adding a few of my own and told her she probably knew more about selling her house than anyone. Once I had her on my side I explained the strategy, she asked some questions, I answered them, she agreed to give it a go and we sold her house, voila
That’s a lie and clearly Michael Bruce is trying to justify them only selling 50% of their stock and charging everyone, I have 9 offices (Anthony Martin estate agents) and when we analysed our data we agreed sales on 85.6% of our properties listed between 1/1/18 to 25/7/18, some vendors change their mind about selling and some homes take longer to sell, but that clearly shows high street agents are more successful. I am happy to provide proof of my statistics. Kind regards Anthony Martin
And some of those properties will have been marketed by other agents who would have been paid nothing for their failed efforts.... unless they were with Purple Bricks, in which case they would still get their full fee
This is just all a distraction for them to avoid publishing THEIR completion stats. Got to say, this guy really believes his own PR.
PB on the run.
Keep up the good work high street guys
so Mr Bruce is basing this assumption on the grounds that the remaining unsold properties never go on to sell? whether with the current agent or another no sale no fee agent? Let alone the fact that the agent has a tangible financial investment in getting those under performing properties sold to continue to make a living, rather than just taking the cash and letting the difficult properties walk?
Yet another attempt by these pair to justify a con by pulling the wool over peoples eyes.
Even if traditional agents do only sell 50% of the properties they list at least they've not been RIPPED OFF by PAYANYWAY listers!
Just digesting the rest of this rubbish and I assume Mr Bruce is saying that by paying his LPE's per listing, they would never be tempted to over value or be somewhat liberal with the detail in order to list a property to gain there £200 payment? which they need to produce regardless of sale just to feed their families. And without releasing PB'S completion figures this is all a load of tosh anyway. Even if PB were to complete on 60% of listings, thats 40% of people paying for absolutely nothing, hardly a fairer system if you happen to be on that side of the fence is it Mr Bruce.
I'll let this thread go soon but it makes my blood boil. Take this statement for example "So, what we said is we want to offer something that's much more competitive, that's fair, that everybody contributes towards, that means that we can offer a much cheaper price.”
The whole sentiment of Mr Bruce' claim is contradicted by that one statement. How is everybody contributing regardless of whether they sell or not fair? it only works for those that sell, those that don't sell have paid upfront to keep the costs down for everyone else.
We don't do sales, just lettings but there is clear evidence that the sales market is slowing down; 3 agents have closed in Christchurch in the last 8 weeks! I have said it before and will continue to say it, when the market slows, fewer sellers will speculate by paying up front as they realise that chances of selling have diminished. As a result all the lpes will see their incomes drop and will leave the business, once that happens it will be a pack of cards as Burple *ricks implodes along with all the other pay before you get service agents fail to make any headway in paying down huge losses and the advertising budget disappears!
He's unwittingly let one particular cat out of the bag, and that's their eagerness to tie up a sale regardless of how flimsy the buyer/chain is.
This is purely because they know that Sold boards/listings (which really mean Sale Agreed) will "spawn" more instructions, which is ultimately their commercial focus. If a huge chunk of them fall through, so be it...
I have never read such nonsense, even when I was in the Corporate World we worked at about 75% of listings selling, as an Independent for 17 years we have always been at over 80%, that is the only way the business model works.
What is even more peculiar is to assume we are idiots who cannot see a timewaster, if I see no motivation from the seller on price and desire to move I will not list their house, I am not compelled to, I am a businessman. That said the way Bruce has fooled the City and investors has been superb, hat's off to the man.
If anyone believes a single LPE can out perform a whole TEAM of motivated genuinely local salespeople is quite simply being ridiculous. I thought the original business model for PB was that in a great market (a sellers market which it has been until recently) you put your house on Rightmove using PB and the LPE will do the admin (not the sales chasing by the way! and the market sells it for you for a grand. Now we are in more of a buyers market I cant see people wanting to pay upfront and taking the risk.
Instruction to sale 18 months ago was probably 80% plus-now its about 50%- 60% unless you are in a hot spot area -why would PB stats be any better-what can they possibly offer that a genuine local agent can not. Pathetic.
Share price says it all.Down over 38% within a year,
I would look at the PB homepage where they claim that they are selling more homes than the top ten agent brands in the UK. I wonder how many 000's of the public that view PB website will dispute that claim?
Its all over the banners on Rightmove as well
Utter rubbish. 50% is completly untrue. Our own stats are nearer 100% than 50%. And as for the 61% London thing there is a world outside of the overheated capital of the UK you know.
Just a quick note. On right move as we speak Purple bricks have 41.8% of there stock as under offer!
All agents are around 40-55% Anyone saying more than that is fiddling the figures. This is because people change there minds for what ever reason.
PB's communication during the marketing, offer and sales stage costs the homeowner more than the cost they would saved it they simply listed a property with them. Homeowners most likely have an increased chance of walking away with less money if they sell with these pb's
Hello
I think there has been a lot of misunderstanding around the podcast interview. As the person who conducted it may I humbly request that people listen to it first before commenting? It can be found here : www.nipodcasts.com
Thank you Barry
Are you genuinely motivated to sell? If you are and the marketing is sound (the standards with PB do vary LPE to LPE) then use PB.
If there is the slightest doubt that you may stay or rent your property instead then waste the time of a traditional NSNF agent who can test the market for you at a stupid price you’ll never achieve.
Charging through the nose the motivated does mitigate the greedy “punters” whose property will not sell, will not garner interest and they will not reduce.
I’ve worked in traditional (mainstream and high end for 20 years) and PB and the PB model does work if the client is well informed and genuinely wants to sell. They will also pay substantially less.
We should all accept that whatever our model it will not fit hand in glove with every client. There is businesses for everyone that knows what they’re doing.
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