Purplebricks

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Revelations by the AFR that Purplebricks agents pushed clients into cutting their asking prices to win a prize from the low commission estate agency are being referred to the NSW Office of Fair Trading by the REINSW.
Its agents had clients cut their asking prices by as much as 20 per cent to potentially win a $5000 cash prize offered by its co-founder Kenny Bruce.
The Real Estate Institute of NSW president Leanne Pilkington said the vendor discounting competition left her "horrified and speechless". 
"Estate agents are paid to act in their clients' best interests by law. How can this be in their best interests?" said Ms Pilkington.
"This is an awesome opportunity to get our customers homes realigned with the market place and make sure we get the job done for them," said the Puplebricks email to agents.
The email advised agents with stock that had been on the market for more than 30 days "needed to realign pricing the most".
The company, founded by brothers Michael and Kenny Bruce, initially threatened to go to court to get an injunction to prevent publication of the newpaper's story about its "NSW Raffle", but has since defended its practices as "entirely normal".
More than 100 NSW Purplebricks vendors cut their asking prices. A seller in Panania agreed to cut their asking price from $1.2 million to $1 million. A Condell Park vendor cut their price from $1.4 million to $1.2 million.
Among the requirements of the NSW Property, Stock and Business Agents Act 2002 (the Act) and the Property, Stock and Business Agents Regulation 2014 (the Regulation) is that an agent "must act in the client's best interests always, unless it would be contrary to the Act, the Regulation or otherwise unlawful to do so".
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However the heightened perception that Purplebricks's fixed-fee model is not working in Australia assisted in its UK share price tumbling to an 18-month low of £2.226
They peaked at £5.145 in August last year.
However Anthony Codling from broker Jefferies International pinpointed last week's decision by Purplebricks to halve the immediately payable upfront commission fee and the rest on settlement as a major catalyst for its share dip.
It also came as major UK estate agency Connells shut down its own hybrid agency Hatched because it was not "economically viable".
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Purplebricks defends reduced asking price competition as working in vendors' interest

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The disruptive proptech company, the British real estate agency Purplebricks has set up office in Sydney, though its business is pitched currently elsewhere.
It has secured a short-term lease for a 300sq m office to use as its first headquarters in the the Coca-Cola building on Macquarie Street. 
Cadigal Office’s Nicholas Mulcahy and Knight Frank’s Jessica Roberts negotiated a gross annual rent of $550 a square metre.
Given its is set to be converted into luxury apartments, the group's lease is for six months to March 2017.
It reportedly could not find suitable larger premises in a tight Sydney office market.
The company will seek about 600 square metre space next year. 
After establishing a presence in Melbourne and Brisbane, Purplebricks will be rolled out to Sydney and the other capital cities 
The Australian business is being led by Ryan Dinsdale, the former marketing director of Virgin Money.
London-based Purplebricks chief executive officer Michael Bruce reckons Australia's "infatuation" with real estate, but dislike of the way traditional estate agents operate, will fuel the success of his company.
The British estate agency, which operates a fixed-cost, high-tech model, was recently launched with 50 "local property experts" and a $17.2 million marketing budget to spread the word among home sellers.
They will be charged a flat $4500 fee to sell their home through Purplebricks.
For those selling a $614,000 median-priced home (according to the ABS), this will be $11,500 cheaper than if they used a traditional estate agent charging a 2.2 percent commission.
Home sellers will also get access to Purplebricks' bespoke online platform
It grew to 300 local property experts in the UK in less than two years. 
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jchancellor-FAypfDUnLy

Purplebricks arrives in Sydney

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Purplebricks, an online property platform that claims to have a unique low-cost model, will likely replicate its losses revealed in its home country, Britain, according to a leading Australian property industry executive. 
"Since its August 2016 launch, when more than a quarter of a million properties were listed for sale with Australian agents, Purplebricks has sold little more than 150 properties and currently has just 310 properties listed," said First National Real Estate chief executive Ray Ellis.
“By any measure, that represents a rejection of its ‘low cost’ model and a market share smaller than 0.1 percent,’ he added.
Purplebricks says it is the third biggest agent in Britain by client instructions with a market share of 5 percent. 
The ABC’, however, reported in September 2016 that just one in four UK customers give it a rating of one star out of five on its Facebook page. 
In contrast, First National says 82 percent of its member agents in Australia achieve 5-star reviews.
“Australians have an entirely different view of property ownership and are focused on building wealth through property investment. They understand the extra value that a professional agent brings to the marketing, negotiation and sale of property, and therefore continue to choose agents to maximise their sale price," said Ellis.
In 2016, Canstar Blue researched customer experiences with Australia’s major real real estate brands and announced that First National Real Estate was number one with the most satisfied customers.
It was the only brand to achieve 5 star ratings, doing so in six separate categories, one of which incorporated value for money.
Purplebricks, which opened its <a href="https://www.urban.com.au/expert-insights/investing/60186-purplebricks-arrives-in-sydney" target="_blank">Sydney office late in 2016 </a>after securing a toehold in Victorial and Queensland, is being led by Ryan Dinsdale in Australia, a former marketing director of Virgin Money. It recently selected law firm lawlab as a preferred conveyancing partner in Australia.
The firm made its market debut in London in December 2015 with a valuation of £240 million after being founded only in 2012 by brothers Michael and Kenny Bruce. However, it booked a loss of £12 million in the year to April 30, up from £5.4 million in 2015.
Purplebricks chief executive officer Michael Bruce, however, reckons Australia's "infatuation" with real estate but dislike of the way traditional estate agents operate will fuel the success of his company.
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jonathanchancellor-7SQnKwU6yx

Purplebricks low-cost model not working in Australia: First National CEO

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A studio apartment at Melbourne has been sold for $187,700, the most affordable sale in Melbourne over the weekend.
Located at <a href="https://www.realestate.com.au/property-apartment-vic-melbourne-124745378" target="_blank">7/9-13 Anthony Street</a>, the property is near the Queen Victoria Markets.
The 25 sqm offering has been fully renovated.
Set on a quiet leafy city street, it was marketed as suitable for investors or someone looking for a private and edgy city base.
It has stained floor boards and white walls throughout the area with a New York loft style bed.
Kitchen features brand new appliances including modern cabinetry, ample storage and French doors that separate the kitchen from living quarters.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/03/12/7_9-13%20Anthony%20Street-2.jpg" alt="">
The updated bathroom in the 1995 complex has modern tiles with neutral tones throughout.
Trams, Melbourne central shopping precinct, Queen Victoria Markets and other amenities are all within close proximity.
It last sold in 2007 for $120,000 and $95,000 in 2002.
The property was offered through Purplebricks agent Andrew Leung who had a price guide of $175,000 to $185,000.
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Purplebricks sell Melbourne studio apartment for $187,700

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The low-cost estate agents Purplebricks has reported its first full-year profits in the UK, with its expansion into Australia keeping the group in the red.
Full-year annual results show Purplebricks accelerated its revenue from property sales for the year to April 2017 - up 151% to £46.7 million ($78 million) of which £3.5 million ($5.9 million) came from its Australian business.
Purplebricks launched in Australia in September last year and to date it has sold about 800 homes and secured 1600 listings.
It listed in the UK in December 2015 worth £250 million ($423 million) and is now valued at more than £1 billion ($1.69 billion), the Australian Financial Review noted.
Full-year annual results show Purplebricks's Australian business generated a £6.1 million ($10 million) loss with revenues exceeded by a big marketing spend (£3.8 million or $6.42 million) and administration costs (£3.9 million or $6.6 million).
Co-founder Michael Bruce expressed satisfaction with the Australian business performance to date.
"With the UK business now in profit it is encouraging to see Australia following a similar growth trajectory," Bruce said.
Purplebricks forecast full-year revenues to reach £80 million ($135 million) in the UK over the next 12 months and to grow to £12 million ($20 million) in Australia. The company recently announced plans to expand into the US.
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Purplebricks reports $10 million losses in Australia

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Purplebricks now claims it is the third most recognised real estate brand in Australia, behind Ray White and LJ Hooker, says its CEO.
After just a year in operation, the low-cost estate agency is now the third most recognised real estate brand, according to its UK chief executive Michael Bruce.
Mr Bruce cited brand awareness research it commissioned in May through market research firm PHD which found that one in 10 people mentioned Purplebricks when asked: "If you were thinking of selling your home, what companies would you think of contacting first?"
This was up from just four per cent in March. It spent over $6 million in its first-year in Australia promoting the brand through television, radio and online.
Since then Purplebricks has leapfrogged well-known Australian brands including McGrath, Hocking Stuart, Century 21 and Raine &amp; Horne, according to the PHD research, following its expansion into Sydney, Perth and Adelaide
Ray White ranked first with 27 per cent spontaneous awareness and LJ Hooker second with 24 per cent.
<div>"We're at 10 per cent spontaneous awareness in Australia and are now the third most well known real estate brand in Australia. And we have achieved that in eight months," Mr Bruce told The Australian Financial Review, which has been pushing the low commission website through its editorial articles.</div>
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"Australian people are taking to Purplebricks quicker here than the UK," the AFR reported.
"We're growing quicker on every key performance indicator (KPI): revenue, local property experts, listings and sales. All of those things we are ahead of where we were in the UK," he said.
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<div>According to its Australian website, Purplebricks has sold about 1100 properties in Australia and won more than 2000 listings since launching. Vendors pay between $4500 and $5500 to sell their home through a Purplebricks "local property expert".</div>
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Australia accounted for 7.4 per cent of Purplebricks' full-year revenue in 2017 of £46.7 million when the company reported its results recently.
The agency secured a <a href="https://www.realestate.com.au/sold/property-house-nsw-oyster+bay-126258198" target="_blank">$3.1 million Oyster Bay riverfront weekend sale</a> for property developer David Fam after it was passed in at its one registered bidder auction.
Agent Joshua Singer told AFR he had sold 35 properties since joining Purplebricks in January from traditional agency Century 21. 
 
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Purplebricks claims higher recognition than the 134 year old Raine & Horne group

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Purplebricks sold around 2200 homes in its first 14 months of operations in Australia.
It represented $1.1 billion of residential real estate sales.
The UK fixed fee company has disclosed the sales as part of its latest interim results to its London shareholders.
Its revenue from its Australian business rose to £6.8 million ($11.9 million) for the six months to October 31, up from £400,000 in the prior corresponding period, after it had been trading for two months.
However, Australian interim losses more than doubled to £5.1 million amid high staff turnover as the company marketing was ramped up especially on 7Mate and 9Gem television.
Purplebricks now has 105 estate agents who charge an average fixed-fee of $5282, put from $4500 for private treaty offerings. 
Its Australian website has 1348 properties currently for sale, claiming its marketing makes the property available to "millions of buyers."
It has eight listings for sale priced above $2.5 million. 
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<div class="cq-article-content-media section">The company launched in September last year with the Purplebricks CEO Michael Bruce again telling Fairfax Media the Australian business was "on track" and performing ahead of expectations.</div>
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"Our market share in Australia is greater than our market share was in the UK at the same time in its evolution," <a href="https://www.urban.com.au/news/72420-purplebricks-reports-10-million-losses-in-australia" target="_blank">he said again</a>.
Purplebricks claims it is <a href="https://www.urban.com.au/expert-insights/74463-purplebricks-claims-higher-recognition-than-the-134-year-old-raine-horne-group" target="_blank">the third most recognised real estate brand</a> in Australia, behind Ray White and LJ Hooker.
Total group revenue more than doubled to £46.8 million with its UK business posting a £3.2 million operating profit. 
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Purplebricks Australian rollout still in the red

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Real estate disruptor Purplebricks has been fined $20,000 fine by the Queensland Office of Fair Trading.
It was over misleading customers about how it charges its fixed fees in agreements with clients between November 2016 and June 2017 that did not properly disclose the fee terms.
It avoided possible court action after it entered into two enforceable undertakings with the OFT for alleged breaches of the Australian Consumer Law and the Property Occupations Act.
"Between November 2016 and June 2017, Purplebricks Australia Pty Ltd, entered into agreements with consumers who were not made aware of the terms of the fees charged.
"Consumers were also misled about additional services offered by Purplebricks, despite the agency advertising 'low, fixed fees' for their services when selling property," the OFT said.
Purplebricks launched its fixed-fee offering in Australia in September 2016.
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The Queensland consumer watchdog said it had received "several complaints from consumers alleging false and misleading representations on the Purplebricks website and advertising regarding their fees, particularly that the fixed fees were payable regardless of whether a property was sold, or their services were cancelled".
Purplebricks was ordered to pay a penalty of $20,000 and enter into two enforceable undertakings for a three-year period to ensure claims about the agency, its services and its fee structure are not misleading.
The OFT said that Purplebricks has already amended both its advertising as well as its contracts and processes to ensure consumers are fully aware of the fee structure before signing an agreement.
Purplebricks Australia CEO Ryan Dinsdale said Purplebricks had positively collaborated with Queensland OFT.
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<div class="cq-article-content-media section">"Understanding that in many cases traditional real estate agents do not publish their fees and terms of business, our rates are prominently disclosed on our home page and we will always act on feedback to ensure we display everything as clearly as possible.</div>
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"Accordingly we have agreed to make some adjustments to wording to improve clarity and understanding," he said
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Purplebricks fined by Queensland Fair Trading over misleading fees

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Queensland is the hotspot for the low commission estate agency Purplebricks, according to internal documents.
Some 40 percent of early June's listings came from Queensland.
It represented 71 fresh listings.
There were 42 new listings in NSW and 36 in Victoria.
WA had 16 and SA had 11, giving a national tally of 176 fresh listings.
The tally covered the period from June 1 -18 this year.
The tally represented just 27 percent of the target listings.
Internal reports obtained by The Australian Financial Review also showed sales numbers totalled 125 out of a target of 423.
The newspaper noted more than half way through June, 23 out of 85 agents had yet to secure a single listing, while 15 agents had secured just one listing and 17 agents two listings.
The numbers indicate how tough it was for many agents to earn a living and why many are quitting the disruptor, according to the newspaper in its fifth hatchet job article on the low cost agency so far this month.
The newspaper initially lauded the disruptor in its initial post-launch coverage.
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Purplebricks Australia CEO Ryan Dinsdale sent an email to all staff last week telling them they should "not to be distracted by criticism from those that seek to undermine us".
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<div>"Instead, have courage and take pride in the fact that we are doing something special and building great businesses together," Mr Dinsdale said.</div>
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<div>It has also faced a <a href="https://www.urban.com.au/news/83984-purplebricks-aren-t-offering-proper-agents-hayden-groves" target="_blank">sustained critical campaign</a> for real estate institute leaders who have claimed they didn't offer "proper estate agents" and <a href="https://www.urban.com.au/news/79406-reinsw-slams-low-fee-upfront-disruptive-agencies" target="_blank">didn't seek top price results</a>.</div>
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<a href="https://www.urban.com.au/news/85596-low-commission-model-under-scrutiny-as-purplebrick-defectors-leak-internal-sales-documents" target="_blank">The Purplebricks low commission model</a> is premised on Australian agents being expected to list 10 properties a month by converting 40 per cent of appraisals.</div>
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Queensland ranks as Purplebricks listing heartland

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Purple Bricks and agency groups like them are not “proper agents” as their television ads claim, industry leader Hayden Groves has claimed. 
"They are not properly negotiating the sale on behalf of the seller, taking on the risks nor managing the sale through to settlement because there’s no incentive for them to do so," he blogged this week.
"They’re not using ACCC approved contract documents either and if you want to use your own settlement agent, you’re forced to pay extra.
"That’s just weird," the Freemantle-based agent suggested on a blog which appeared on the REIA-funded website, the Real Conversation.
It renewed the campaign by the Deputy President of the Real Estate Institute of Australia who had previously attacked “pseudo agent” models.
Groves pointed out that “proper agents” are incentivised through the payment of a commission at settlement which ensures they work for their client from beginning to end to procure the best result possible.
"That is our responsibility by law."
Appropriately, an agent that fails to complete their task doesn’t get paid, he said.
"Comparatively, Purple Bricks charge no commissions but incentivises their agents to list your property for about $5,000 (including advertising), then effectively you’re on your own unless you pay for “extras”. 
The REIWA governing council re-elected Hayden Groves as the Perth institute’s president last October.
Groves claims WA Purple Bricks agents are not employees of the parent company and therefore must hold their own agent license.
He suggested of the 90 registered Purple Bricks participants in WA, "only three hold a license (sic) that enables them to act on a behalf of a seller; with the remainder (if not employees) breaking State laws." 
He pointed out Purple Bricks has fallen fowl of the Office of Fair Trading (OFT) in Queensland for alleged breaches of the Australian Consumer Law and Property Occupations Act (Qld 2004). 
Queensland’s regulator claim consumers were misled by Purple Bricks about additional services offered by them, despite the agency advertising ‘low, fixed fees’ for their services when selling property.
"Purple Bricks also failed to fulfill some of it's regulatory obligations around properly accounting for funds held in trust and some other technicalities that “proper agents” need to comply with."
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