Last week it was the BBC, this week it’s the Homeowners’ Alliance (HOA). If I was Purplebricks – and I hadn’t already been sold for a quid twelve months ago – I’d be starting to worry that my valuation might be slipping.
In a fascinating article in Mail Online, Purplebricks came under fire from the association for its upfront charging, the reliability of its valuations – and even its £60 anti-money laundering (AML) fee.
In a strong repudiation of the ‘pay now, pray later’ business model, the association that represents future homesellers said that those considering moving with Purplebricks should;
Get local agents to value their property first;
Be mindful that they may not be visible to all suitable buyers;
Understand that, not only won’t they get their upfront cost back, in six months’ time they’ll have to pay again if they’re still on the market.
The HOA also pointed out that a traditional commission arrangement with an agent aligns a homeowner’s motivation with the agent’s – unless the property completes, neither party gets any money.
In Purplebricks’ case, of course, if the property doesn’t sell then only one party gets any money – Purplebricks. And it’s the other party – the homeowner – that loses it.
The alleged ‘saving’ that is created by paying upfront is lost by the fact that you are less likely to sell – because Purplebricks has no additional financial incentive to secure a deal. They’ve already been paid. Furthermore, they don’t have a financial incentive to push for the highest price possible – whereas traditional agents, on a commission from the eventual sale price, absolutely do.
Purplebricks’ CEO, Sam Mitchell, tried to deflect these arguments with a truly eye-widening statement. Here’s the comment in full:
“We think commission is a poor way of paying for estate agency services. It implies that work by an estate agent differs according to the price of your home, which simply isn't true. The work required to value, list, market and negotiate a home remains similar each time.” (My emphasis).
Lesson 1 in GCSE Economics (you are 14 years old) starts with the basic ‘Supply and Demand Graph’; you know, the one that shows higher prices = lower demand. Therefore, a higher-priced property requires more work in order to secure a buyer because – guess what? – there are fewer of them around. As such, charging more for working harder to find them seems … fair?
There are loads of other things wrong with Mitchell’s statement – valuing property can take longer with more expensive properties; listing them with the right photography and care can be time-consuming; marketing to the right audience to get the highest price needs more than just slinging it up on Zoopla (or paying more for Rightmove); negotiations with fewer buyers requires a more expensive skillset to succeed – but the glaring lack of awareness of basic market fundamentals is, on its own, astonishing.
Either he doesn’t know this – which is terrible from someone claiming to provide a service to more homesellers than any other brand – or he’s deliberately saying things that he knows aren’t true, which is just terrible in general.
That even the HOA are finding themselves weary of Purplebricks shows that, for all the fake ‘commisery’ and multi-million-pound marketing campaigns to exactly these people, that bubble has popped. The unbelievable has become unbelievable.
Strike, Purplebricks, Yopa and others have tried to convince sellers that they only need to pay upfront for less and they’ll get the same service – and the same property price, and the same outcome – as a traditional agent.
The HOA is clear that this isn’t the case.
And they’re 100% correct.
Comments