Purplebricks Australia – Who Are They & Should You Use Them?
In 2014, Purplebricks opened their online doors in the UK and shook up the real estate industry as we know it.
Now they are trying to replicate their success in Australia.
But what does this mean for Australian real estate agents and real estate firms? It’s definitely going to be an interesting period for the industry as a whole.
Online websites have failed to make a dent in the Australian real estate industry to date. Will things change with the emergence of Purplebricks?
Let’s look at the situation in more detail.
Note: Purplebricks quit the Australian market in 2019.
The emergence of the hybrid model & Purplebricks in the UK
Tradition is something which is upheld in England in all aspects of life. But one company with a particularly colourful name is leading the way in a bid for change.
Where traditional agencies once focused on street presence, Purplebricks now relies on Local Property Experts (LPEs) to make their sales.
Purplebricks states they have no need for the expansive offices or the glossy brochures that large real estate agencies are known for.
Because they don’t pay large sums in rent, they can afford to spend their money on the marketing and widen their customer reach.
Purplebricks claims to spend upwards of $1.7 milliona month on advertising.
And in exchange, they offer the latest in digital technology and 24-hour service, something that again, traditional agencies cannot yet compete with.
While online providers have been around for some years, it is only since the emergence of Purplebricks, supported by a sophisticated IT platform, that a tipping point may have been triggered.
Some consumers appear willing to change their real estate selling habits
Investors are okay with funding initial losses until companies such as Purplebricksachieve profitability
Former lawyer Michael Bruce joined forces with his real estate agent brother Kenny about five years ago when they realised something was wrong with the way people sold their homes. And from their various meetings and brainstorming sessions, Purplebricks was born.
But why does this affect the industry so much?
The ability to operate on an IT platform allows the real estate agent model to charge a significantly lower agent fee, in some cases, for high value properties, up to 10 times less.
Purplebricks supports the owner with open homes, the owner manages buyer inquiries and receives offers all through the online booking engine.
So exactly how does Purplebricks and the hybrid model work?
After a customer registers with the website in question, they can then book a valuation online. The LPE appraises the property, takes photos and advertises it online.
So how much does it cost to list a home with Purplebricks?
In Australia it costs $4,500 inc. GST (Private Treaty) or $5,870 inc. GST (Auction). This flat fee is paid, even if your property doesn’t sell.
If you want Purplebricks to manage your open homes you pay a one off fee of $770. If do not wish to use their conveyancer/solicitor ($800) and wish to use your own you are required to pay $300 extra.
2018 update: Purplebricks has increased their Australian selling fees twice in 2018, adding around 20-30% in total to the prices above, depending on the state. The increased fees now include open/private inspections. Depending on your situation, these changes may make it more economical to negotiate and sell property with a traditional real estate agent.
A traditional real estate agent from America has come up against the Purplebricks model and has some opinions about their motivations behind selling real estate. Note that his quoted timelines and costs do not apply to the Australian real estate market.
Why is it referred to as a hybrid?
The term ‘hybrid’ refers to the fact that a real estate company cannot operate purely online.
It works alongside a professional network of agents who:
visit the property
provide a valuation
produce a floor plan
offer telephone assistance during the sales process
meet clients face to face to close the sale
Some hybrids also offer to conduct open homes and other more traditional services for an additional/optional charge.
The hybrid model offers opportunity for change in the industry
Since its inception just under two years ago, Purplebricks commands a massive 62% share of the online real estate market and is now UK’s third largest estate agency. They were valued at over £1 billion in 2017.
Founder Michael Bruce believes that once Purplebricks enters the Australian shores, profit won’t be too far behind. He hopes to break even in approximately two years.
Traditional real estate agencies are onlynow just understanding the threat caused by these advances in technology and changes in consumer behaviour.
The numbers speak for themselves.
Purplebricks sold and completed on $4.8 billion from April 2015 to April 2016 with a further $2.9 billion sold subject to contract. And their instruction to sales conversion sits at approximately 77%, well above industry norms.
While Purplebricks currently covers around 5% of the UK market, experts predict that the number will rise to 20% by 2020.
As the most reviewed estate agent in the UK with a rating of ’excellent’ on Trustpilot, it is clear that their customers are enjoying the break from tradition.
In light of their evident success, other companies are starting to follow their lead.
Here is a list of some of the other hybrid models in the UK. These companies may offer some insight to what we can expect to emerge in Australia.
Yopa charges a similar flat fee starting from $1,345. In a similar hybrid model, YOPA instructs a property expert to carry out a valuation and guide you through the process. They will also help you negotiate the best price for your home.
They then advertise the property on all the major portals and guide sellers through the sale process. Tepilo will liaise with all the solicitors and estate agents up and down the chain to ensure a successful sale.
House Simple charges varying price options from $162 to $1,530.
Their service includes:
a home visit by a property expert
one-week free trial
a personal account manager
a for sale board
professional photography and floor plans
advertising on the major property website
a ready book of buyers
legal setup and management to completion.
Time will tell whether any of these hybrids will manage to achieve as much success as Purplebricks.
It is clear that the rapid change in technology means that consumers now have more information at their fingertips and more options than ever before.
And, more importantly:
Consumers can now make more well-informed decisions that suit their particular needs.
What does this mean for Australia and its consumers?
Similar to that in England, Australia currently operates on a more traditional method of home sales. Agencies maintain a face to face full outsource model; the very same one which is nowbeing taken over in England by the hybrid online/telephone model.
Of course, things will not only change for sellers but also for estate agents. Current estate agents choosing to remain in the traditional model market will have to ensure that they are offering value for money and going over and above client expectations to achieve a sale.
In terms of the Purplebricks Australia hybrid model, licensed and experienced estate agents will be employed solely by the company. These LPEs will assist vendors through the sales process receiving a flat fee per instruction. There is, however, the ability to earn additional money through conveyancing, referrals, and insurance.
Ultimately a house seller is only going to feel confident with an agent who has their best interests at heart.
Whether this is one from the traditional or hybrid market. After all, selling a home happens only once or twice in a lifetime, and it is important the sellers make the right choice regardless of cost. If you would like to see your options with real estate agents, check out our agent comparison tool for information about sales histories and fees.