Online estate agent Purple Bricks could change its flat fee pricing structure but has delayed making any decision until the autumn. The age
Online estate agent Purple Bricks could change its flat fee pricing structure but has delayed making any decision until the autumn.
The agent, which today posted a £9.4million operating loss, announced plans for a pilot to test a ‘hybrid system’ of a reduced flat fee plus commission.
Currently, customers pay a £999 upfront for Purple Bricks to sell their home instead of a percentage commission on sale as they would with most traditional agents.
Online estate agent Purple Bricks will pilot a different fee structure in the Autumn
In a market update, Purple Bricks today said: ‘This single-minded proposition has got us to where we are today and created a business model that has resulted in Purple Bricks becoming the largest estate agency brand in the UK.
‘However, we also recognise that, to extend our market leadership, we’ll need to evolve our pricing. That means looking at different pricing strategies to reduce the up-front fee and splitting the payment between listing and completion.’
The agent posted losses today in its annual results after the coronavirus lockdown deeply affected its operations, with the group’s total loss for the year coming to £19.2million.
The business had £31million on its balance sheet at the end of April, compared to £62.8million in the previous year.
However these figures don’t include the extra £30.6million Purple Bricks made from selling its Canadian business last month.
The firm also revealed that around 50 per cent of their staff had to be put on the Government’s job retention scheme once the lockdown came into force.
What would a fee and commission mix look like?
Purple Bricks hasn’t given any indication of what their new fee structure might look like, however they have indicated that it will be a mix of commission plus a lower flat fee.
For example, under their existing structure on a £450,000 home the seller would pay £999.
But if they had to pay a lower flat fee of £499 for example, plus say 1 per cent commission, that would rise to £4,999.
This would still be significantly cheaper than other agencies. For example, selling the same home with Foxtons, which charges up to 2.5 per cent commission, would cost £11,250.
Cheif executive Vic Darvey said: ‘Following an in-depth pricing study in the first half of the year, we had hoped to pilot a new pricing structure in early 2020, but the lockdown has delayed this to the autumn.
‘I believe reducing the level of the upfront fee will widen the market opportunity significantly, although a fixed fee element will remain a critical part of our success, as hybrid adopters remain more motivated to sell their homes.
‘Reducing the upfront fee will reduce the barrier for many customers in instructing us – while higher fees on completion will allow our local property agents to earn more from each sale.’
Buying agent Henry Pryor said: ‘Given that Purple Bricks’ lower, up-front fee should provide the biggest saving for the most expensive properties it has always been assumed that it would appeal most to the top end properties, but it seems that these sellers remain unconvinced.
‘Changing the model to compete directly with traditional agents seems a little desperate.
‘I’m not sure that it’s the cost that’s wrong, it’s the call-centre style service that doesn’t appeal to many. Call centre agents have proved an expensive experiment which consumers have yet to embrace.’
Buying agent Henry Pryor
How does Purple Bricks work?
Purple Bricks was launched in 2014 by Northern Irish brothers Michael and Kenny Bruce as ‘the first 24-hour estate agent’.
The agent puts you in touch with a local property expert who gives you a valuation and gets professional photos of your house and details arranged.
For an extra £300 – or £399 in London – Purple Bricks will conduct viewings for you.
As part of the £999 service sellers get a dashboard on their website where you can track viewings and listings on all the top portals.
Unlike some online agents, which can cancel listings after a certain time, Purple Bricks markets your property until it sells. After the deal is done a post-sales team contacts you to help you to completion.
Should you use an online agent?
The recent stamp duty cut has given the housing market a boost and months of pent up demand may now finally be released.
Estate agents keen to usher in a new rush of customers, none less so than the online agents such as PurpleBricks and Yopa, which have grown in popularity over the past few years.
And an agent that you don’t have to meet face-to-face in a high street branch may seem more appealing than ever – especially as most charge a flat fee that can be as low as £99 rather than take commission that can be several thousands of pounds.
But is using an online estate agent when selling a home a false economy, or is it better to use a traditional agent, albeit at a higher cost, to get a better deal?