As many of us have already heard, The “No Commission” Real Estate Company Purplebricks has announced its inevitable withdrawal from the Australian market.
If you recall, we had already begun observing the cracks in the purple wall back in November last year. But now, Vic Darvey, the companies CEO has made the “difficult decision” publicly official. Existing clients were reassured however, that Purplebricks exit from the Australian market would be conducted gradually and in an orderly fashion over the upcoming months.
But lets look at what went wrong in the first place.
Was it actually just the Australian market as they claimed? Or was their timing and understanding of who we are as both real estate sellers and buyers just not researched thoroughly enough?
Their debut in 2017 had our TV’s relentlessly plagued with advertising heralding their low cost business model. Because the company is online only, money that would usually be lost in overheads was instead poured into advertising, upwards $1.7 million a month to be precise. And while this may have had the far reach they expected, who hasn’t experienced the misery of being bombarded with their ‘commisery’ ads? The UK based start up eventually found it wasn’t so easy to be cash flow positive and profitable with a bull headed advertising approach.
Advertising aside, in a market like ours, a fixed fee business model that allows agents to flood the market with properties that they have no motivation to sell was never going to thrive! I’ve written at least two articles just recently where we’ve discussed the value of investing in good agents who can negotiate on your behalf.
Flooding the market was detrimental to both their company and their clients and it was ultimately the down fall of the Purplebricks Australian leg since low cost hybrids like them, yes there are others… rely on huge turnovers to make a profit. Profits that weren’t being made due to agents not understanding how to navigate the landscape and not being given any incentive to do so.
Overall I believe that these hybrid companies have given traditional agents a better name. The dismantling of the company only reiterates the success rates and value of employing a properly trained agent and an experienced agency.
Even though there will always be a market for online only agents, always remember the importance of finding an agent who is a competent negotiator and perhaps most notably someone who makes you feel confident and comfortable – trust your gut on this one.
So it seems the true legacy of Purplebricks may be the reassurance that traditional Real Estate sales models work, and that while on the surface commissions may seem unnecessary they will in fact lead to greater financial benefit for the seller in the long run. Consumer behaviour is forever changing,
adapting to these changes demands constant dedication from agents both inside and outside work hours and commissions reward that dedication.
I think in the end Purplebricks summed it up best, albeit not how they intended, “when you pay peanuts, you get monkeys.”