Brokers have reacted to the sale of the company for just £1
Online estate agent Purplebricks has agreed a deal to sell its business and assets for a nominal £1 to rival online competitor Strike.
Strike will also take on Purplebricks’ liabilities under the terms of the deal, but warned over jobs losses among the more than 750 employees at Purplebricks.
Brokers have reacted to the news, believing the £1 sale =exposed key challenges faced by online estate agencies.
Profitability and competition
Kundan Bhaduri (pictured), property developer and portfolio landlord at The Kushman Group, said Purplebricks’ sale to Strike had highlighted issues such as profitability struggles, competition from traditional firms, consumer perception issues and financial setbacks.
“Traditional agencies have also done well to adopt digital services in the past few years, increasing competition for online-only players,” he said.
Meanwhile, Bhaduri said consumers have shown a preference towards personalised service when selling their most valuable asset. Bhaduri said online agencies claim to offer convenience at a cut price, while traditional agencies provide expertise and face-to-face interactions.
“That said, hybrid models, blending online and offline elements, do hold promise; adapting to evolving consumer preferences and market dynamics is crucial in the present market,” Bhaduri said.
Striking a balance between convenience, technology and personalised service, Bhaduri said, remains key.
“Purplebricks’ fall serves as a reminder to industry players to embrace innovation and cater to the ever-changing needs of the market,” he added.
Rhys Schofield, managing director at Peak Mortgages and Protection, meanwhile, said the news of Purplebricks’ sale was unsurprising.
“When they launched and were the new kid on the block they genuinely caused huge disruption with their low fee model, unburdened of the costs of an expensive high street office,” Schofield said.
Gradually however, Schofield said the novelty wore off - new players came in and estate agents no longer feared going up against them as they got better at explaining that the cheapest agent is not really the one charging the lowest fee if they are going to sell your house for thousands less.
“To compound the issue, the business has seen a huge talent drain as their best staff have seemingly left en masse to go and work under other self-employed models as it is much more lucrative and rewarding,” he said.
Schofield said this was a business that had been circling the drain for years - it only took as long as it did courtesy of a booming housing market.
Mismanagement at Purplebricks
Clive Read, owner at Goldmanread, said Purplebricks had failed in its mission for a number of reasons, specifically alleged mismanagement.
“Their agents were initially on self-employed contracts but found themselves working long hours trying to manage multiple sales, not earning a great deal more than if they worked for traditional agents,” he said.
Read said the technology that promised so much did not bring the expected cost savings, and, perhaps most importantly, ignored the fact that buying property is an emotional decision that needs human input.
“Purplebricks also expanded internationally in the US and Australia with disastrous results,” he added.
This result, Read believes, would seem to leave the market for online estate agents as one that favours a hybrid approach, in which consumers can pick and choose the level of service they want and pay accordingly.
“Strike have done well out of the purchase, as they will be able to take advantage of Purplebricks’ technology, customer base and data, while retaining the most productive staff; no doubt there will be redundancies across both groups,” Read said.
Imran Hussain, director at Harmony Financial Services, said Purplebricks had been going downhill for the past few years, due to poor performance and a model which simply did not work as selling property is a results-based business.
“Everyone involved at a senior level at Purplebricks should not be allowed near any property related business again, as the so-called disrupters have proven their model simply does not work,” he said.
Mortgage Introducer reached out to Purplebricks for comment but has not heard back by time of publication. This article will be updated should it choose to comment.
Why do you believe Purplebricks have agreed a sale of its business and assets for a nominal £1? Let us know in the comment section below.
