Purplebricks; What is really going on?

This post has now moved to our new blog address

https://blog.pdq-estates.co.uk/2017/04/12/purplebricks-what-is-really-going-on/

45 thoughts on “Purplebricks; What is really going on?

  1. Hi Andy. By all means. Thank you. Purplebricks – What is really going on?
    Purplebricks is one of a raft of new-breed estate agency companies making some bold and questionable claims in the property market at present but how many of these claims stand close scrutiny and are they even trading within the law? Over the years there have been many businesses who have seen what they believed to […]
    https://pzwoody.wordpress.com/2017/04/12/purplebricks-what-is-really-going-on/

  2. >there is strong circumstantial evidence echoed by other analysts that the turnover of LPEs’ is very high, suggesting that the promised rewards have not been forthcoming.

    Hi Chris,

    What is this evidence and what would be considered “very high” for an agent venturing out as self employed for the first time? Surely you would expect it not being right for a certain percentage of people? Not everybody is cut out for self employment.

  3. Hi John.
    If I were setting out on a new venture with the support and backing of a PLC with associated multi-million pound TV, property portal, press and internet campaign I would expect my chances to be in a successful, profitable business after three years to be better than for almost any ‘hot-start’ franchisee, let alone after just a few months.

    The turnover appears to be well into double figures which suggests that either the model is fundamentally flawed or that PB are possibly failing in their duty of care in the recruitment of and to new franchisees. It doesn’t appear that Purplebricks are members of the British Franchise Association however, their code of ethics makes interesting reading http://www.thebfa.org/about-bfa/code-of-ethics

  4. LPE’s are not franchises. Some are employees but most are self employed individuals and they all receive payment from PurpleBricks. “Well into double figures” doesn’t mean anything. That could be 20% or 90%. If it’s 20% then this would mean that the model has been a success for 80% which would endorse the viability of the model and might even suggest that the 20% it didn’t work out for were not up to the job.

    The article doesn’t really say anything concrete, just innuendo.

    Why do you compare an unverified market share to a verified one? This provides us with absolutely nothing.

    Why do you make such a big deal about estimates not being reached. If we look back to what you were saying 2 years ago you posted an article which claims “Cheap agents could cost UK consumers half a £Billion in wasted fees”. What is going on with that? You are claiming as low as a 30% completion rate costing homeowners £500,000,000. Well my own small sample of data shows that to be way off the mark for PurpleBricks.

    Also your figures for Hardman & Co estimates are out of date. probably from before the move into Australia last July. The consensus forecast of brokers estimate a loss of £8 million. Hardman & Co a loss of £5.5 million but remember this includes startup losses for Australia. I personally expect the UK operation to make about £2 million profit and Australia about £7 million loss. Just an estimate. We’ll see, there should be a trading statement shortly after the end of the month and results in June.

    As I say, I don’t really see what your article tells us apart from the fact that people aren’t very good at predicting the future. Of course there’s plenty of innuendo but nothing concrete.

    • It is very clear from Purplebricks’ own service agreement that LPEs’ are indeed franchisees John abd specifically mention resolving any disputes using the British Franchise Agreements code of conduct. There is little concrete information as Purplebricks are very good at ensuring there is very little concrete information to work on. Hence the article.

  5. Chris, if a competitor came to me and asked me questions about my business I’d tell them to get lost. Why do you think PurpleBricks have to answer your questions?

    Purplebricks are very open about the actual LPE’s they have and also the properties they are listing are there for everybody to see. It doesn’t take much effort to keep a track of these things and seeing as you are so interested I’m surprised you haven’t been doing this.

    Still why bother collecting evidence when you can cast aspersions?

  6. Jon, I think it unlikely that we will agree however, to answer your questions/ statements please consider the following.

    Purplebricks entered the property market rubishing a particular business model and many, many agents by making a number of claims and statements, some of which have already been shown to be misleading, not based on sound data or, either knowingly false or naive to the point of incredulity. It is not unreasonable to challenge those claims. There are also legitimate questions over the legality of the way it has operated and continues to operate in terms of redress, money laundering, data protection and employment law.

    I don’t expect a competitor to tell me it’s business however, when a competitor makes statements claims about how well it is doing or the savings it allegedly offers, I expect that competitor to justify them (incidentally, as do trading standards) with clear, reliable, transparent unbiased data. PB have not to date, in my opinion, done so.

    I do expect all of my competitors to work within the law in the same way they have every right to expect me to so do. I don’t believe that’s unreasonable.

    • Well in terms of legality, expecting is fine, but damaging somebodies reputation without proof is not in my opinion. Innocent until proven guilty.

      In terms of having to justify claims. Are we talking about adverts or any comments made? It just seems completely alien to me to claim somebody is making false claims (by innuendo or otherwise) unless you have evidence. The only way to stop somebody would be to use the courts which can be expensive even if you win the case. I’d be very surprised if Trading Standards ask every business to justify every claim made.

      You aren’t even asking PB to justify claims you’re asking them to make claims on their current conversion rates. Perhaps they should give you a weekly update? They have stated some time back in a radio show that their conversion rate was 88%. That doesn’t mean its currently 88% but if you doubt it then why not ask Trading Standards to investigate rather than repeatedly questioning it? I must admit I don’t really understand the amount of time being taken over a comment on the radio which 99.99% of people probably didn’t even hear and if they did they probably wouldn’t know if it was good or bad.

  7. Hi Chris,

    Could you also clarify what you are alleging in regard to the advert from Ian Taylor? It doesn’t mention he is looking for a local property expert. Perhaps the position relates to a more junior role? The person who visits for measuring and photographs perhaps?

    Did you make enquiries before posting your comments and the advert?

    John

    • That’s interesting John. In the version of this article that I have read the advert was placed by James Lavis who is the lpe for Bournemouth. Where abouts are based to be seeing a different advert? Also are you in any way shape or form employed, self employed a franchisee or related to the above of purple bricks? Your defence of them seems quite vercifarous.

      • James,

        My interest in PB is as an investor and after reading all of the “questions” elsewhere many times over the last few months I have research the true situation. LPE turnover, portaljuggling, estimated profits, growth of instructions & income and the number of listings that go on to sell with them as opposed to another agent. I am a long time investor, a Computer Scientist and also a customer of PurpleBricks which gives me a unique insight into how they and their software work.

        My conclusions are that a lot of people are being misled (the people in the Estate Agency Business being one group) that provide no actual facts and focus on out of date broker estimates, focus on the worst cases rather than the norm, talk of struggling to increase revenue, talk of illegality and general negative innuendo. At least Chris has toned down his attack on portal juggling “he is not claiming or implying that any of those firms mentioned were deliberately undertaking such an activity” but why even mention it if he’s not implying it?

        So what we’re seeing is spin, exactly what some are accusing Purple Bricks of. My point is that the truth is somewhere between the extremes and I wouldn’t hold shares if I thought PB were struggling to increase revenue and I’m looking at the data every day. The key is market share growth which according to my proxy, has increased by about 18% in the last 2 months.

        As for the advert, yes it’s the same one. No actual mention of recruiting for an LPE position is there? If the point being made is that the person sought is going to be working immediately as a LPE then it’s just lazy journalism based on supposition. Make some enquiries and you’ll find the truth rather than have to rely on innuendo.

        John

      • Right that explains the defence. To be fair to all sides in this “debate” it’s all spin the latest advertising campaign focusing on “commisery” is mainly designed to in my opinion mislead and probably to annoy estate agents. The pricing structure can’t really be compared due to the very different nature and structure of the process. With pb you are paying them upfront for the work they due regardless of success whereas the run of the mill estate agent gets nothing until all the work is finished. As far as I am aware anyone taking all the risk in any business tends to receive a greater reward when successful. I believe that the company will fall short on its original targets but let’s face it who doesn’t ! There is also some merit in the argument over local property experts and the definition. I previously mentioned James Lavis, now no argument can be made against him being a local property expert in the Bournemouth area having worked in it for over 10 years that I know off, the storey is not the same however in the Salisbury area where I live. There have been 3 different local property experts covering Salisbury since the companies launch all 3 having never worked in Salisbury itself as estate agents. It’s all spin and as long as people are honest in their presentations then all is fair in love and war. There will be people on both sides of the battle lines that are unscrupulous but not all. Let’s face it estate agents have been tarred with the evil brush for as long as I can remember. The full accounts when published will undoubtedly make interesting reading, I wish you well with your investment.

  8. Hi Chris, Great article. I would suggest it takes 10000 hours to become an ‘expert’ at anything (http://sethgodin.typepad.com/seths_blog/2008/12/10000-hours.html) I don’t think PB really thought about/cared what an ‘expert’ might be but used the word to give potential clients a misleading confidence in their offering. PB probably employ/use very few ‘experts’ in property and even less ‘local experts’ – shamefully misleading IMHO. I am not anti-online or anti-PB (they give consumers more choice) but let’s keep things factual and honest and not the current bullcrap that comes from their adverts. Tom @ Jungle Property

  9. >I would suggest it takes 10000 hours to become an ‘expert’ at anything

    Hi Tom, perhaps this is why the person being sought wasn’t being labelled an expert? In typical estate agents how do you gain that experience? Perhaps this is the case with the person being recruited by PurpleBricks too? It said they will have the opportunity to progress.

  10. Hi Tom. Thanks for your comments. The term expert will always be a subjective one except where definitions exist such as in case-law etc. However, as in the update photograph above (17.4.17) and from other recruitment tweets/ LinkedIn adverts, many of Purplebricks people have little to no experience of estate agency yet are called experts from day one. I do not believe that the definition used by Purplebricks PLC is one that a reasonable person would take it to mean and would be very interested to see how such a claim would fare in court if brought under Consumer Protection Regulations. I believe such a case would be in the public interest.

  11. Hi Chris,

    >I believe such a case would be in the public interest.

    Perhaps Trading Standards can add it to their list?

    I was interested to see Mark Townend’s comment on your linkedin post where he says “I agree wholeheartedly that consumers need to be protected. However, I think there are bigger fish to fry at the moment; there are plenty of High Street agents actively over valuing to win instructions, duping clients into 5 month sole agency contracts. There are more who are clearly conditionally selling to purchasers who will agree to use their in house mortgage consultants. Others who will put their own avarice first by sidelining cash purchasers in favour of those who will be using in house services. Until this industry puts its own house in order bleating on about online / hybrid agents will simply fall on deaf ears with the general public. Quite simply the public wants choice, it is up to High Street agents to justify the genuine value of their charges”

    I was also interested to see that my own comment appears to have been removed.

    • Chris,

      Does this answer your questions in relation to profit?

      https://www.estateagenttoday.co.uk/breaking-news/2017/4/purplebricks-will-be-biggest-uk-agency-in-two-years-with-share-price-up-50?source=newsticker

      From Peel Hunt who have apparently released the biggest research note to date.

      “The UK business is now profitable on a monthly run rate and will see a big drop through to profits from increased revenue/market share. From a breakeven operating profit in full-year 2017 we forecast margins to increase to 28 per cent in FY19 with operating profits of £24m.”

      • Hi John, haven’t peel hunt always been very bullish on their opinions regarding purple bricks? They’ve always had a strong buy report on them when others haven’t, or am I mistaken?

      • Hi James,

        Peel Hunt, Investec, Citigroup & Hardman & Co have all analyzed PurpleBricks at various points and rated them a ‘buy’. The only broker who seems to rate them as overvalued and values them at 97p is Jefferies. Jefferies have also suggested that listing to sales conversion is just 17% which my own analysis shows to be way off the mark.

        Peel Hunt are a very well respected City Analyst. I’m new to the sector but I’m told by an experienced investor , somebody who isn’t a big fan of PurpleBricks, that they are the most respected for the sector.

        I’ve been investing for over 30 years now and the end of year for PurpleBricks is in 5 days. There will soon-after be a trading update if the pattern of earlier years is adhered to. I’d eat my hat if the short term estimates of Peel Hunt turn out to be wrong 🙂

        I’ve done my own research. I have proxies for sales completion figures and turnover of LPE’s and I know what I think, however some people prefer to believe innuendo.

      • Fingers crossed for the results next week then. Competition in any market can only lead to improved service for the consumer.

  12. Hi There,
    Excellent article ( and comments from both sides of the debate ) on a subject that everyone with a stake in the industry should be informed about.
    I believe that the advent of so called “online” agents has taught us all a lot about the business of selling property on behalf of clients – the importance of analysing our cost base, simplifying the listing and viewing process for customers and providing real value to those that use the services of estate agents. It has also highlighted the critical requirement for genuine and credible personal and individual service from ” experts ” – be they from Purplebricks or more traditional models.
    Personally I believe that ( nearly ) all effective modern estate agents are now ” Hybrids ” to a varying degree along a wide spectrum from purely online through to a more traditional model. Ultimately the customer will decide where they wish to place their custom along that spectrum.
    One thing that does perplex me is the apparent lack of credible and independent analysis as to the true percentage of market share ( for sale and sold ) for those that at least self-identify as “online” estate agents – which may or may not include Purplebricks.
    Is anyone aware of where such statistics are available?

    • Hi Simon,

      I’ve come across various comments during the short time I’ve been researching these things and the figures that are closest to my own proxies are those that are saying 4 to 5 percent. That is if we’re talking about new listings rather than stock levels. I haven’t really looked into stock levels.

      See http://www.propertyindustryeye.com/online-agents-go-from-2-5-of-market-share-to-over-5-in-two-years-rightmove/

      That’s an article from May last year and there’s a figure of 5% from Shipyard. I have no idea whether they are independent or not. I seem to remember Rightmove commenting at some point and and if my memory serves me correctly this was somewhere around those levels.

      I personally think it’s closer to 4% (again, I’m talking about new instructions).

  13. Hi John,
    Thank you so much for that. It really is appreciated. That figure does appear to reflect the, admittedly anecdotal, information that I have for my own area In Cambridgeshire. Of course it does hugely depend on whatever definition is used in respect of an agency to be an “online” estate agent. I personally have not come across any meaningful definition which is why I would ask that agents self-identify as such for the purposes of this analysis. For me, that phrase is meaningless as nearly all estate agents are online to a lesser or greater degree as I alluded to in my post.
    Are you, or anyone, aware of a satisfactory definition?
    If 4 or 5% is accurate then it does strike me just how minimal the impact of the online agent has been to date on the overall market – despite the ( sometimes justifiable) hype and massive marketing spend.
    My own view is that the phrase “online” should be replaced with the word “budget” or “up-front payment” model as a more accurate description of this market sector. Isn’t that a description that most would accept as fair and reasonable?
    What would be your ( or anybody else’s) thoughts?

    • Hi Simon,

      The way I have always thought about it when I have hear the expression “online agent” is that they have no high street presence.

      I think the problem for online agents was always one of marketing and brand recognition. Whilst the estate agency industry has probably been aware of all the hype this has probably been totally missed by the general public.

      PurpleBricks started to expand nationally (in terms of their LPE’s) and started spending big on advertising 18 months ago and appear to have made huge progress and are said to have quickly risen to 70% of the online market. There will be a trading update from them next week.

      To me looking on it’s all about brand recognition, marketing and trust which develops over time.

    • Simon,

      I missed perhaps the most crucial factor in terms of Purplebricks’ rapid growth. This is the growth in LPEs. Up from 205 at this time last year and currently 474.

  14. Hi Simon
    Thank you for your comments and observations. There is hard verifiable data available which I had access to in writing the original article, which showed that ‘call-centre’ agents* market share has peaked despite the massive spend you mentioned. The data I had access to is now in use by some highly respected names, organisations and businesses.

    As the most recent updates to this story allude to, there are some major announcements to be broken in the near future which are highly likely to create a major upset and embarrassment in the industry.

    *I believe this is the easiest and most accurate way to differentiate them

    • >There is hard verifiable data available which I had access to in writing the original article, which showed that ‘call-centre’ agents* market share has peaked despite the massive spend you mentioned.

      Hi Chris,

      When you talk about market share do you mean stock levels or new instructions?

      Don’t you mean that it is lower than its peak to date?

      It would have to be able to tell the future to determine that the market share has peaked.

      Where does this data come from and who has verified it?

  15. Thanks Chris,
    I respect ( as ever) your well considered view and attempt to arrive at an acceptable definition of this market sector. I think that an acceptable definition is critical in this fascinating debate.
    However, I would respectfully suggest that this is a slightly disengenuous definition as ,like it or not (and I don’t!), most of these “call centre” agents do appear to offer slightly more than just that facility – even if it is at a higher cost to the consumer than they would first advocate.
    This is why I believe that ” budget ” or ” up-front payment ” is a far more accurate description.
    Thank you for your engagement and courteous interactions on this matter. I have learnt a lot!

  16. Hi Chris,

    I’ve just seen that you have updated your blog with some data.

    As I suspected would be the case, this data is being spun in a way that favours traditional estate agents who, given the short time they are contracted with the vendor will be looking to achieve a quick sale and are more likely to encourage the vendor to list at a lower price and reduce quickly so that sale can be achieved during the period when they will receive commission.

    By looking at completions from properties listed in the last 12 months, 84% of them will have been on the market for less than 10 months. To use these figures to establish the number of completions is flawed & biased.

    I would also ask you to confirm that the data has come from an independent source and how it has been verified as accurate. For example, how can you establish whether a flat listed with just a street name and an incomplete postcode has gone on to completion?

    My own research, which is also on a small sample but a national one, looks back at listings from 10 months or more ago and determined the percentage that had completed in that time period. My figures are very different from yours and much closer to the 77% completion rate published by PurpleBricks in their last audited accounts than the 25% figure you have come up with.

      • Ah sorry. I think I now understand why your figures are flawed. The information in Zoopla & Rightmove is often incorrect as I believe you are aware.

        I assume you are aware that customers using PurpleBricks frequently remove their property from the market when they receive an offer.

        I am using PurpleBricks to sell and you should note that once somebody has made an offer to view your property, direct communication between you and the viewer can begin. Rightmove & Zoopla have no idea what is going on and a sale can complete without it even becoming ‘under offer’ or ‘Sold STC’ in the portals.

      • Hi John,
        I hope that you don’t mind if I join in this discussion.
        Sorry If I’ve misunderstood, but are you saying that a PB property can (sometimes) proceed to being under offer and then complete but in some circumstances they will still appear to be available for sale on Rightmove and Zoopla until it is picked up on the Land Registry and then removed some weeks or months after completion?
        Again apologies if I have misunderstood your explanation.

      • Hi Simon,

        Yes, I have been told about circumstantial evidence that suggests this is a possibility, not just with PurpleBricks but with all Estate Agents. I would imagine (and I have 35+ years experience in software development) that removal of the listing from Rightmove would require action by a human with the methods employed by traditional Estate Agents making it less likely to happen.

        Aside from human negligence, there’s also scope for system/software error.

        Here is a response I received about a property when enquiring with a traditional estate agent “When the sale of a proeprty (sic) completes it is removed from our own website but sometimes for whatever reason still appears on the Rightmove site.”

        I would even go so far as speculating that whilst Rightmove does provide information from the Land Registry, there is no guarantee that once finding this information the property would automatically be removed as a listing. In fact I wouldn’t be surprised if the listing process is completely separate from the process providing information from the Land Registry.

        I would imagine that the explanation as to why Chris Wood’s figures for sales completions by PurpleBricks is vastly different from my own is down to a combination of factors which results in PurpleBricks’ sales taking longer to be recorded in the Land Registry. Chris may want to explain in more detail how he carried out his analysis. Did he record listings on a daily basis during the period in question for example?

        Of course that won’t stop people with their own agenda from claiming that PurpleBricks complete on fewer properties than they actually do. I will personally trust audited accounts as a more reliable source of information than information from those with their own agenda. The key word being “audited”.

  17. Yes, of course it will end up on the Land registry but you said your data was from Zoopla & Rightmove.

    >Are you suggesting that a sale can be agreed by PB and not show as SSTC on a web Portal?

    I’m saying that a sale can go ahead without PurpleBricks, Rightmove & Zoopla even knowing about it. Wouldn’t this be the case with any Estate Agent? From what I’ve seen I imagine this could happen more often with PurpleBricks because there is no need for a middleman in negotiations.

    Using the PurpleBricks platform, the offer on my property didn’t initially come as an offer but as a message. It was only at my request that we didn’t proceed independently of PurpleBricks. The person making the offer was quite happy to just tell the solicitors to get on with it.

    I suggest you do some research before publishing your findings. PurpleBricks’ online support chat facility is very useful in explaining how things work.

    I’m sure you will claim all sorts of illegal practices but remember law evolves and will put the interest of the public first. Of course PurpleBricks will have to keep Rightmove & Zoopla happy and their system can easily be changed to reflect theirs or trading standards’ or even the Courts’ wishes.

  18. Sorry Andrew, I had presumed the reply had come from Chris.

    And i do appreciate that the land registry information does eventually appear in information provided by Rightmove & Zoopla so ignore that point.

  19. Hi Again John,
    I do accept that there is always the possibility of human or systematic error.
    However, if a property was being advertised as “For Sale” when in fact it had completed, the estate agent would be in breach of Consumer Protection Regulations and The Property Ombudsman’s code of conduct.
    I am not necessarily suggesting that PB would be more or less likely to adapt this as an intentional policy than any other estate agent but from the apparent method ( as described by you) of monitoring and implementing these matters it does appear to me that the likelihood of such a misdescription is almost built into their modus operandi.

  20. Hi Simon,

    I have the “Law of Estate Agency” by John Murdoch on order so will be able to look into these issues next week hopefully. I would be surprised if their systems haven’t been thoroughly vetted by lawyers though and the fact that no action has been forthcoming does suggest to me that trading standards aren’t confident of winning a case.

    To be honest I think there are plenty of issues of more significance for trading standards to be dealing with.

    I do have a fair amount of experience with Leasehold Law and have represented myself in Court & at Property Tribunals. Often law just comes down to interpretation and can be tested. The lower courts are notorious for making suspect decisions. Whilst a small Estate Agent may always choose to act in a way that is 100% sure to be within the law I would imagine a company like PurpleBricks would be prepared to test the law if it is fundamental to their business model.

    These type of issues could result in years of legal disputes going up through the hierarchy of the Courts with appeals.

    One other criticism I have of Chris’ article is his assumption in regard to the advert for an employee which he is suggesting is for a LPE. Whilst looking through the audited accounts yesterday I came across a case study from one of the LPE’s which states “have now recruited three Local Property Experts and two viewings assistants to help build upon our early success.”. It would appear to me that Chris is jumping to conclusions that the advert was for a LPE, the advert certainly doesn’t state this.

    • I suggest you review a number of similar adverts and linkin profiles of ‘LPEs’ which clearly show people are moving from totally unrelated jobs and being advertised as ‘property experts’within a matter of days.

      • I’ve already looked at a sample of PurpleBricks’ LPE’s and they all appeared to be highly experienced. I’ve also investigated what percentage of LPE’s leave. I’m not going to go checking every LPE but I think if you have concrete evidence then you should at least use that rather than jumping to conclusions about an advert posted by James Lavis.

        I think the general public would be more interested in their own LPE’s experience. An investor would be more interested in the overall picture. It’s purely an Estate Agent thing to be hung up on all the legalities and rare cases and most of them are probably too busy to even care.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s