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Online Estate Agents: Has the Bubble Burst for Purple Bricks?

After all the hype about Purple Bricks, with unhappy customers, a rap on the knuckles from the ASA and a BBC Watchdog Investigation, has the bubble burst for online estate agents?

HAMPSTEAD, England - Sept. 21, 2017 - Rezul -- Online estate agent Purple Bricks launched with a big bold PR campaign, but were rapped on the knuckles last year by the Advertising Standards Authority (ASA) for misleading claims.

It turns out that the online estate agent's claims to save customers £4158 against a typical high street estate agent could not be substantiated.  Many Vendors have been shocked to find they saved nothing, and they also had issues with regard to the deferred payment option, which saw customers signing a credit agreement with a third party, and a fee that was payable even if the property didn't sell.

Watchdog Investigation

Following a growing number of customer complaints, the BBC's Watchdog conducted their own investigation.

Watchdog revealed that indeed, the claims of huge savings were still being used, and Local Property Experts (LPEs) were not being transparent about the service.

Presenter Steph McGovern said many customers had contacted Watchdog to complain about the company's deferred payment option, which they claimed had not been explained during the sign-up process.

Watchdog went undercover at five different properties around the UK and invited a Purple Bricks Local Property Expert(LPE) to provide an appraisal.

In three of those five cases, the agent failed to mention that the sellers would be entering into a credit agreement with a separate company and the LPEs were not giving accurate information about instructions, sometimes claiming to obtain more than twice the real number of instructions they really received.

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One LPE had claimed to list 20-25 properties per month, when Watchdog found they were actually only listing between eight and11.

If there wasn't a pin to burst the bubble already, Watchdog provided another one.

The arithmetic does not add up

Watchdog are far from the first to raise suspicions over Purple Bricks, not just in their claims about savings, instructions and credit agreements, but also about their reported sales volumes.

Jefferies' leading residential sector analyst, Anthony Codling, has previously warned  "the arithmetic does not add up" in Purple Bricks sales performance figures.  Any experienced estate agent will tell you, an offer subject to contract is not a sale.

Codling's own analysis found that a substantial number of vendors had paid a fee, and received an offer, but failed to complete the sale of their property through Purple Bricks.  In fact, his analysis found that of those who supposedly 'sold' their homes through Purple Bricks, only 14% progressed to completion.  In a note to market investors Codling warned:

"We hope that for their customers the saying 'all comes to they who wait' is true. The lucky 14 per cent who haves old their homes waited on average around 4.5 months between selling subject to contract and actually selling. For the rest, the wait has been around 6.5 months so far and the clock is still ticking."

Reviewer: 'Purple Bricks is a ChocolateTeapot'

The UK's largest Customer Review Website for the Property Industry, allagents.co.uk, doesn't offer much solace for Purple Bricks either.  Although there are some positive reviews, the Company scores an average satisfaction rating of 1.54 out of 5 from 101 reviews. They score poorly on most factors, scoring only 32% on valuation accuracy, 37% on fee satisfaction and only a shockingly low 17% of reviewers would recommend the service to other sellers.  Many of the reviews make uncomfortable reading, with one reviewer even describing the company as a 'chocolate teapot'.

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Unsurprisingly, traditional estate agents are unhappy that Purple Bricks purports to offer the same service as traditional high street agents, when clients compare the fees but have to sort out their own viewings and post-sale completion.   Clients may not appreciate the value of these services until they don't have them – and there is nothing worse for a client than feeling reassured by a reasonable offer, only to see their sale delayed or falling through.

Industry Analyst: 'Purple Bricks should get their own house in order before seeking to sell the homes of others'

Following the Watchdog investigation, Purple Bricks share prices unsurprisingly dropped.  Residential market analyst Codling believes the online agency has some way to go to win back customer confidence.   Having grown so fast, many believe Purple Bricks are recruiting LPEs with the wrong level of experience – and the negative press is unsurprisingly causing hesitance among Vendors, who recognise that selling a house and progressing to completion requires more than an advert on a website.

Codling warned investors he expects the company's shares to continue to underperform, saying somewhat bluntly,

"We believe that in order for Purple Bricks to deliver the profits so eagerly anticipated, it needs to slow its growth and get its own house in order before seeking to sell the homes of others."

Most traditional estate agents would agree.

About the author:  James Morton is a Director at high end London Estate Agent Beham & Reeves (https://b-r.co.uk/)

Lisa Baker ITCS

Source: Benham & Reeves

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