02 Oct Purple Bricks turns the industry red – Michael Bruce
Rarely do I see a startup company ruffle as many feathers in the real estate industry like Purple Bricks has in the last few weeks.
Purple Bricks, if you have missed all the hype, is a UK based company that claims to be a full service agency offering to sell property for owners for as little as $4,500 but, as you will hear, that is a bit misleading.
We caught up with that company’s CEO when he was in Australia. For the first time in the 10 years or so that I have been doing this show, I make a comment about Purple Bricks after I speak with Michael Bruce in the show this week.
Kevin: Purplebricks, the UK-based online real estate agent that charges homeowners a flat fee to sell their property, is promising to shake the local market and save Aussies nearly $6 billion in commissions. There has been a lot of news and a lot of talk about this in the last week or so.
Purplebricks, of course, has launched. They launched in the UK in 2014, where they charge homeowners a flat fee – as I said – of $4500, including marketing costs, to sell their homes. Joining me to get a bit more detail on this, the CEO and co-founder, Michael Bruce, for Purplebricks.
Michael, thank you for your time.
Michael: It’s my absolute pleasure. Thanks for having me on.
Kevin: That’s okay. The Purplebricks concept has been very successful in the UK, as I said. But attempts in Australia to run a similar concept in the past haven’t really worked. Why do you think this is going to work as opposed to others? What’s so different about Purplebricks?
Michael: I think what’s absolutely clear is that people have tried to do things along the journey, but they haven’t done anything like Purplebricks.
What Purplebricks does is it takes great local property experts, licensed real estate agents, and gives them the tools in order to provide a first-class service for customers. They give them technology. We’ve spent nearly five years now perfecting that technology, that makes them much more productive, so they can spend more time with homeowners, chatting to them in living rooms, helping and supporting them through each settlement.
At the same time, it gives the homeowner a much better experience, much more transparent experience, because they’re able to interact with the market. They’re able to see everything that’s happening 24 hours a day. They’re able to get to know who’s arranging viewings, what their feedback is, and when offers are coming in, the second an offer is made, it’s instantly with them.
In terms of all the things that traditionally, the perception of the industry has been it’s not quite as transparent, not as much communication, etc. With Purplebricks, what we’ve tried to do, and the reason why we’ve been successful, is because we’ve built a model that encapsulates all of those things and delivers them back to the homeowner but for a fraction of the cost that they would pay a traditional real estate agent.
Kevin: Of course, the Internet’s made everything much more transparent – a lot more information for consumers. I’d challenge you on the point there about transparency. I think one of the things that we have seen in the industry is a lot more transparency over the years. No one denies that’s a good thing for consumers. But I just wonder if we’re discounting, here, the amount of work that goes into selling a property.
You’re asking here for consumers to take a big lot of that load on. In the past, we’ve seen private sale, for sale by owner, a lot of those people actually go back to a traditional agent because they simply can’t handle what needs to be done.
Michael: I don’t disagree; I think you’re absolutely right. The only difference is that doesn’t apply to Purplebricks. When you talk about in the past, those for-sale-by-owner type propositions, they haven’t worked. They didn’t work in the UK. They’ve been around for eight to ten years. There’s only a particular type of homeowner who’s willing to participate in that type of service. And they haven’t seen any material growth in the UK, unlike Purplebricks.
Purplebricks has grown massively over the last two years because it does everything that a real estate agent does. It provides you with the whole support, the whole process, right through to settlement.
What we have to be really clear on is that the process of selling a property is the same anywhere in the world. It’s about getting a property onto the market. It’s about presenting it in the best possible way. It’s about making sure that you market it in order to engage as many people as you possibly can so that market forces does its work alongside the agent to help support that customers get the best possible price. Then once you get the best possible price, it’s about supporting them through to settlement.
What we’re doing is all of those things, but what we are doing is cutting out stuff that is ineffective, that doesn’t help and support customers achieve those objectives. Our customers end up getting a light-bulb moment. They get a moment whereby they say, “I’ll get a full real estate service, a meta local property expert, a licensed real estate agent, who’s promised a particular type of service, who’s delivered on that service, got me the best possible price, sold my house, and assisted me through to sale.”
That is just fact of what real estate agents do, and that’s just fact of why Purplebricks is so successful, because we do all of those things.
Kevin: Which parts will you actually be cutting out, Michael? You said there’d be some parts that you’ll cut out that’ll be irrelevant, that’ll cut back on the cost. What are those things that’ll be cut out of the process?
Michael: In terms of the process, the process will be exactly the same, but it will be different in the sense that it will be instant, convenient, and transparent. For instance, it’s not a matter of people trying to engage with real estate agents during office hours.
I understand that here in Australia, people put their mobile numbers in and things like that so that they can communicate more after hours – and that’s fair and that’s good – but reality is with Purplebricks, people can arrange a viewing at any time 24/7 instantly.
They’re instantly requested you for feedback, chased for feedback. The second they provide that feedback, it’s instantly with the seller. The second that an offer is made, that’s instantly with the seller. The seller can see the offer, they can see the nature of the offer, they can see who’s made the offer, and the position the person’s in.
They can go through the whole auction process at whatever time of day or night. They can get access to information about their marketing. They can contact and speak to someone 24 hours a day, so if they have an issue, then that issue can be quickly resolved. They get a local expert who helps them through to settlement.
They’re getting absolutely everything; nothing’s cut out. But what we’re doing is taking technology and people and delivering in a better way.
Kevin: I understand that. Michael, in terms of the local experts, you say these are licensed agents. What will be their role in that? Will they assist with negotiations? Will they assist with open homes or anything like that? Or do they very much just take a…?
Michael: They will assist with all of those things. They’ll be the first port of call in terms of undertaking the appraisal. They will then undertake all the process of getting and supporting the customer onto the market. They will, if the customer so chooses, take all the viewings for the customer. They will, if the customer so wishes, negotiate with all of the offers, and they will be heavily involved in assisting and supporting the customer through the whole journey.
Kevin: Is all that done for the flat fee of $4500, or are there add-ons there dependent on what the consumer would want the agent to do?
Michael: The only additional add-ons that we have are if you want us to undertake the viewings for you. There’s an additional fee of $385. That covers you for every viewing, no matter how many there are.
The reason why we offer choice for consumers in this respect is because of the thousands of homeowners we spoke to across Australia, the majority said they felt they were better equipped to do the viewings themselves. And 79.7% of people said that if they could undertake the viewing and save some money, they’d like to do that. What we do is give choice: the 80% who want to save money great, and for the 20% who want to have the comfort of having that support, we’ll provide that as well.
In relation to negotiating offers, and all of those things, that’s all part of the service. There’s no additional fee there.
The only other additional fee is if you want to undertake an auction, then it’d be $850, but that would include the auctioneer and all of the viewing service covered, all of the open houses, everything like that. If a customer takes any of those options, they can have as many viewings as they wish, they can have as many open houses that they desire.
Kevin: Of course, I do understand what you’re saying, and I can see there’s a need for a model like this. The only question I would ask is the quality of the agents. I would question why good agents would be attracted to your model and have to work as hard as what you’re saying to earn about one-third of what they would earn ordinarily. Isn’t that then going to impact the quality of the agents you attract as these local experts?
Michael: I’ve been involved heavily in the training of these people over the last few weeks, and I have to say the quality of the people has been great. I take your point of what you say, but the reality is these people will not be earning less. These people will be earning as much, if not more, than what they would otherwise earn. They’ll be far more productive.
What we do is give them the opportunity to run their own business. We don’t charge them like a franchise. We give them advertising and marketing on a scale never before seen in the industry. We give them technology that makes them more productive and ensures that the promises they make their customers, they know can be delivered.
And we’re saving people loads of money, so in reality, it’s easy to take a look at the quality of our local experts and say, “Well, they’re not earning $1 million dollars”, but that’s a very small fraction of the market who earn that amount of money.
Kevin: Of course.
Michael: They will be certainly earning as much, if not considerably more, in relation to others in the market, who are providing a great service for customers on a day-by-day basis.
Kevin: How does Purplebricks make money out of the transaction? Do you get a portion of that $4500 flat fee?
Michael: Absolutely. The real estate agent will receive a proportion of the fee, and Purplebricks will receive a proportion of the fee. Obviously, we will earn revenue off other things, such as mortgages, etc., and other things that we can offer services to customers if they decide they want those.
Kevin: There you go. So, there’s an insight as to how it’s going to work.
Michael, I want to thank you very much for giving us your time, and we’ll watch with interest how Purplebricks develops in Australia. Thanks very much for your time.
Michael: It’s my pleasure. Thanks for having me.