Purplebricks.com, the new online agency founded by the brothers who sold Burchell Edwards to Connells, told investors it will make annual profits of £25m in just over two years’ time.
However, the projection, in a pitch to investors appears to have been superseded by a later business plan. See the company’s statement at the end of this article which we are happy to publish.
It had said that it was aiming to list just over 15,000 sales instructions by the end of July – even though it is not rolling out nationally until September.
For the year ending July 31, 2015, it anticipated getting 85,413 instructions, and the year after, 100,849 instructions – equivalent to 10% of all transactions.
The figures compare with those of eMoov, an online estate agent currently claiming most market share, which listed 2,522 properties last year, although it says instructions this month are 50% ahead of March last year.
Purplebricks.com’s extraordinarily upbeat investment pitch also set out its lettings targets: 4,362 instructions by July 31 this year; 30,596 in the following 12 months; and 39,660 the year after.
Purplebricks.com, in telling its would-be investors that it was anticipating enormous profits, says that following a loss this year of just over £1.5m, forecast a net profit of £17.6 in the year to July 31, 2015, and £24.9m profit the year after.
The ambitious forecasts were set out in the funding brochure, which has been seen by Eye.
It said of its figures: “The forecast financials are based on a successful launch in the Meridian region in January 2014, followed by a launch in the Central region in April 2014 and a staged national rollout commencing in September 2014.
“The key assumption is that in each month, Purplebricks will achieve a number of new instructions equivalent to 2% of the properties available for sale in the relevant region in that month.
“The corresponding figure for lettings is a number of new monthly instructions equivalent to 1.2%.
“The forecasts also include a conservative conversion rate of ancillary products such as mortgages, conveyancing and insurances.
According to the brochure, £1.3m had already been invested in the business by its founders, Michael and Kenny Bruce. The brochure says they were looking to raise a further £2.1m.
As Eye reported last week, backers have now been named as including Paul Pindar, former chief executive of Capita.
However, the brochure said that the business already had another well-known backer – Allan Leighton, who was CEO of ASDA and sold it to Wal-Mart, and is a former chairman of Royal Mail.
The brochure we saw said he had agreed to be a non-executive director “and to invest personally”. We understand that this is not the case although we have no further details.
Leighton once said: “There is nothing better than being told: ‘This cannot happen, you’ll never be able to do this, you must be mad’.”
Purplebricks.com also revealed ambitious recruitment plans in the investment pitch which we saw, with 125 staff anticipated this year, 355 recruits the year after, and 480 in the year ended July 31, 2016.
The brochure describes Purplebricks.com as “the disruptive next generation estate agency”.
Purplebricks will charge sellers an upfront, non-returnable fee of £599 including VAT. The letting service, says the brochure, will cost from £72 including VAT.
The brochure also refers to a marketing campaign to consumers, which includes a TV advert. It says this has already been shot, but does not say which channels it is due to appear on.
This is the Purplebricks.com statement:
“All of the numbers and figures quoted within the article are considerably out of date and are inaccurate. The information obtained by Property Industry Eye is not a true reflection of the expectations of the business and considerably understates the level of investment secured. The comparisons and observations made are, as a result also inaccurate and do not represent a fair reflection of the current circumstances. Purplebricks were not asked to comment prior to publication of this article.”
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Living in the past. I have no quarrels with an agent carrying out the valuation, viewings, agreeing offers and the sales progression whilst adhering to industry standards. And I have no problem with someone doing this from a nearby serviced office.
What I have a problem with is someone selling a property in Bournemouth from an office in Newcastle.
If your suggesting that emoov or purplebricks use local agents in a franchise capacity based locally well if they carry out all functions expected of an agent then good luck to them.
Wether the consumer will give them the instruction over a high street agent is another matter however and a whole different discussion.
Assuming that valuation is carried out correctly (by whatever method 🙂 ) and apart from the obvious difficulty with agent accompanied viewings, what’s the difference between selling a property in Bournemouth from an office in Newcastle, or a serviced office in Bournemouth?
I was suggesting that the valuation would not being carried out correctly by someone sitting in an office in Newcastle. Again only a suggestion 😉
Paul, advice from the NAEA website for potential sellers as to how to arrive at an asking price, ‘Make sure you do your research into how house prices have been affected in your region, town – even street. Take a look on websites to see how other properties in the area are priced. Also check to find out how much similar homes on your street sold for; a number of websites provide this information.’ It then goes on to say that you need to be aware of current trends. As the NAEA are offering this advice for Joe Public, perhaps, as I said before, valuation is not rocket science!
I suspect most surveyors, who, to practice, have had to undergo far more rigourous training than you have, would resent your accusation that they are out of touch with the market. Has it not occured to you that they, like you, will work on a certain geographical area, know their patch and will of course be seeing current asking prices in the same way as anyone else!
And I’m not quite sure how to take your last question, firstly, it relates to a totaly different topic from valuation, and I do hope, for the sake of your clients, that you are not so far out of touch and are aware that the property misdiscriptions act has been repealed!
You also dodged the question as to how YOU arrive at your valuation!
I’m not saying that surveyors are “out of touch with the market” I’m saying that comparables have not yet caught up with the prices that buyers are currently prepared to pay, well actually it’s Peter Bolton King making the assertion and I refer you to his comments in the piece you referred to in a previous post.
How do I arrive at my valuation???? I go to the effort to know my market, I get stuck in at all levels, I even go out on viewings(some prefer not to) to assess applicant feedback? I’m short I get off my backside. Oh and also have a look at the Internet as you do.
‘I go to the effort to know my market’ Ah, so what you’re saying is you do the same as the rest of us, look at comps, look at what competition is currently on the market, and use your local knowledge. Forgive me, but I thought you said that ‘categorically’ did not work in your area, and I was hoping for something radically different to what the rest of the world do that we might all be able to learn from.
Just to make the point again, surveyors doing a mortgage report WILL look at current market conditions, so your assertion that comps have not ‘caught up’ is incorrect.
Still worried about your comment about PMA!
Blimey someone’s clearly ruffled your feathers Hound!
You are putting words into my mouth…simply looking at comps and checking the competition does not equate to ‘knowing your market’ as i’m sure you are aware or are you?!
And re the assertion about comps not catching up with the market, don’t take my word for it, heres what Peter Bolton King, global residential director at the RICS, has to say on the matter “said the problem arises because valuers use comparables. If property prices rise quickly, comparable evidence never catches up.”
If your refering to Positive Mental attitude then no, how about you 🙂
I look forward to more debates with you on this already very good website.
No ruffled feathers here Paul, just enjoying the debate, if fact, if you look at a thread from yesterday, http://www.propertyindustryeye.com/the-unhappy-news-about-agents-but-is-it-true/ you’ll see I’m the only one to respond to the request to let ‘eye’ know if we’re happy 😉
Just to echo your thoughts about ‘eye’, you are spot on, it’s an excellent site, and I’m guessing that anyone who is passionate enough about what they do to comment on articles has a positive mental attitude!
Back to the debate, I’m not going to disagree with you at all that comps and competition equate to knowing your market, but I’m sure you’ll agree that knowing what has happened historically and what is currently happening is a big part of it. I think we’re basically singing from the same hymn sheet.
A Question for Paul H – You have a very strong argument for having local knowledge.. What would your argument be if one of these online or “hybrid” agents had spent time recruiting some of the best and most knowledgeable estate agents from various regions for them to then be able to offer their local expertise when visiting potential vendors. Each one of these knowledgeable individuals having the NAEA accreditation that you mentioned. Each one of these individuals having come from a number of years working in the high street estate agents and therefore being able to offer the very same expertise and local knowledge that you can? What happens to the high street model then?
Paul, your valuations sound fantastic. Just what a vendor wants.
How much do you charge, what is the guarantee, and can I have one without signing a contract ?
Hound
In my area it will categorically not work. There are so many varying types of property that it is impossible to give a valuation without knowing the area, history of the street, what graffiti art is on what wall etc .
I arrive at a valuation as defined by the NAEA training manual and years of experience Mr Hound;-)
The properties are being down valued as the market is moving so quickly that the surveyors have not yet caught up. It’s easy to give a valuation in a stagnant market as you know, but not in a rising or falling market which is what we usual experience.
Can I ask how you train your vendors on the Property Misdescriptions Act or what training you provide them;-)
Paul, I’ve always understood that the way to arrive at a valuation was to look at what price comparable properties have achieved, and what competition there is currently on the market, and I’ve successfully used the same method since 1983, yet you say you do not believe this method will work in most areas! I note that on another thread, you state that 25% of your sales this year have been downvalued on survey, How do you arrive at a valuation?
Thanks for your input Hound.
I do not believe that this will work in most areas and certainly not mine which has a diverse range of properties, this is the same for most cities where no two streets are the same.
Giving a valuation in an area/town where you have comparable properties next door that sold three months ago in a town where you see increases of £100,s as opposed to £1000,s is also a big difference.
If you looked at historic sales in my area from three months ago on nethouseprices you could be £150,000 out, and that’s not exagaration!
I’ll chip in again and answer Paul’s question on the three that I referred to. On two of them the vendors happily did the viewings, the other was tenanted, and the vendor some distance away, so we accompanied.
Valuation was no problem, I looked at other historic sales in the immediate area, and what was currently on the market in the respective towns. Exactly the same process as I would do for a property on my doorstep.
Hope I’ve not stolen your thunder Wilko, and I’ll look forward to seeing your answer to Paul’s question.
Proves the point then Wilko, you don’t need to be on the high street in a particular town to sell there, I’ve also recently sold three (for existing clients) in neighbouring towns. We also have an agent here, who decamped from the high street in 2008 (for hopefully obvious reasons) and still gets a good market share from a serviced office.
There’s a flaw in your logic with Haart though, can you see them passing savings on? 😉
If you don’t mind me asking Wilko, but for the 6 that are due to complete, who did the viewings and how did you derive your valuation figure, also have you had a problem with the surveys and if so how did you overcome it with local comparables etc?
To be honest, they knew the price they wanted from local agents valuing like Bairstows etc. All the local agents said “you will have no problem selling as there are lots of buyers out there” They then felt that saving money was their main motivation. I just ran the sales alongside what I normally do. It was very easy actually.
Paul and Hound, actually can agree with parts of what you are both saying and I think therein lies where we currently are with our industry – there is a real split in what various members of the public think.
I did a test recently and offered (by door to door leaflet delivery) just under a £1000 fixed to sell any property in a neighbouring town away from my small chain of branches.
People living in that town were aware of us, but as we didn’t do much (if any) business there, due to the town having a selection of its own agents. I thought I had nothing to lose and would be great to get some boards up and maybe some knock on business.
The take up was great and I secured 7 instructions (good board positions) with 6 sold almost as soon as marketed.
They are now starting to complete. In short I found (alongside my core business) People seemed to really craved a decent low cost alternative from an established name.Even though we were in a neighbouring town, they understood that the internet would do our selling with a proffessional agent to advise them at all stages also at hand.
This gives creedence to Haarts “super office” scheme ie if they close 10 offices and work from 1 covering regions rather than towns they can cut their overheads and pass the savings directly to the sellers. Profit margins could remain unchanged?
Hound, the local factor is a good point and is the contributing factor as to the money gained or lost, before and after an offer has been agreed.
Although you say most vendors have a shrewd idea of how much their property is worth, to a degree that is true but in areas like mine where there are no terraced housing and where a one bed can range from £275,000 to £575,000 and a two bed from £400,000 to £1.25m+, a local knowledgable agent is priceless (literally).
Nearly every vendor we have sold for this year has been amazed at the valuation figure and then price agreed, of course this market is slightly different from the norm but even in steady times an incorrect valuation in my area could cost a vendor between £10,000 to £150,000. That’s a lot of money when consider your only saving £10,000 by going with an online agency!
Paul, not going to disagree with you on any of that, and that’s precisely why I said that the ‘local’ factor is very important.
However, from close to 30 years experience I can tell you that most vendors are capable of doing viewings themselves, and indeed that’s the norm in this part of the world, and most vendors have a shrewd idea as to what their property is worth, after all, the ‘local market knowledge’ which perhaps used to be more important is fairly easy to find, with ‘sold’ prices readily available to anyone, (online, of course!) the surveyors have their own database and don’t need to local agent for comps, and valuation is not rocket science.
Hound said….”Actually Paul, the nonsensical model is the one that most of us use currently”.
We carry out all our viewings, we give up to date valuations based on local market knowledge, we are able to provide local and up to date comparables to surveyors and we have trained staff on hand to do all this.
The online model passes the buck on to the consumer which is a recipe for disaster.
Actually Paul, the nonsensical model is the one that most of us use currently, easy to forget that in a market where most of our stock is selling without too much trouble, but remember that historically the industry average is that we only sell 50-60% of what we list, so we do a lot for nothing, and charge our successful sellers for those that are unsuccessful, so it is no sale-no fee that is really a nonsense and there is of course a strong case to argue that it is not fair on the consumer!
Not sure that Wilko’s vision of the future is correct, I don’t see private sales becoming 30% of the market. I think more likely is that online agents will take a much bigger share, as is happening in most other industries, and we will see more ‘hybrid’ agents, doing much the same thing as now, but operating off high street and charging an up front element to their fee, and that the only people on the high street will be the specialist country house agents, and in the larger towns and cities, perhaps the corporates with ‘super’ offices covering a much larger geographical area (as I believe SpicerHaart have already hinted at)
Although I think the days of the high street agent in their current form are numbered, I do also think that despite the growth in doing things remotely in other industries, the local factor in agency will still be very important in a lot of customers eyes, hence the thought that we will see a large increase in ‘hybrid’ business models which retain that local factor.
In general I agree with the post (Hound on March 24, 2014 at 2:24 pm) and also read with interest "remember that historically the industry average is that we only sell 50-60%". I have listed with an estate agent now for 7-months – without success despite making several recommended price reductions – so out of frustration I am about to try PurpleBricks (not to save money!!) but simply because with PurpleBricks I get direct 24/7 on-line access to manage viewings etc (that's so important !!) – with the same exposure with Zoopla, RM etc – as provided through high street estate agents.
All I am missing out on is my property not appearing in a high street window but the percentage of prospective buyers looking in high street windows compared with those searching on-line must be very small these days.
Also I think one area that most estate agents are missing out on is with on-line video of which YouTube provides an additional marketing channel – which is free.
On-line video can also help filter out time wasters given many viewings can be just for curiosity which in themselves can create additional costs and on-line video can sometimes help satisfy curiosity, with only serious parties wishing for an actual viewing.
Also for those property buyers who need to re-locate or who are wishing to purchase a holiday home at some considerable distance away, then on-line video along with image stills can help in determining if a long trip for a viewing is justified.
Every single one of these online agencies beat the same drum and all want to talk down traditional agents whilst stating how much money can be saved but when are we going to see the British media expose this non sensical model for what it is and show how much the consumer can be at risk and how much they can actually lose?!
I have said many times before that the industry online models will eventually take over the high street models. Many disagree and I don’t know who will be the big success story. I will have a punt as follows as to how it will be when this type of report is published in around 24 months ;
Purple Bricks, e moov,optimhome, pink etc etc will take possibly c5% of instructions.
Traditional high street agency will take around 60% (albeit at much lower fees and with maybe less physical branches)
One of DPGs sites (poss primelocation which they are advertising extensively again?) will launch as a main player in private listings(they would have done it with or without AM) and they will take c30% as they will spend the most on advertising.
The remainder will be sold by independent, experienced agents who will work from home and give a proffessional 1:1 service from start to finish, probably for a fee of around £500.00 + add ons like epc’s/premium ads etc. They will work self employed un-affiliated and use Rightmove to list…could even have their faces on boards like Australia/America.
Like I said just a punt…the speed at which things are going anything can happen!
Purple Brick’s linkedin reads:
Driving down the cost of moving home in the UK
It’s a real shame. I hope PB have more to offer than just stick a home on RM /and or Zoopla.
Vendors in my experience don’t have a problem paying for greater service levels.
I think many traditional fee models (be they with a Hg St office or serviced -should also rethink their RM and Z strategies. If budget models are not removed and more budget agents allowed in, the more traditional models are propping up RM and Z for the benefit of budget agency. Im hearing many traditional agents saying they may not renew Z & RM accounts
With more commission in the pot, agents can also market listings via one another to allow split commissions. I work daily with agent who B2B main/sub agent market. Many are working close and even doing deals before a property is hitting the portals, simply as buddy agent is selling a home and those buyers wish to buy. By B2B not yet on the market properties are going WITHOUT portal marketing. Budget agents can’t do this as they normally don’t have enough fnds in the pot. In cases vendors are making £1,000’s more as more agents bring more offers to the table.
I suspect RM and Zoopla both have their eye on offering direct agency services if Agent’s Mutual puts a hole in their boat so don’t expect them to let a potential competitor into the camp. That said both EasyProperty and Purplebricks are basing a great deal of their plan on access to these portals
Surely the key to all of this – both Purplebricks and EasyProperty – is whether RM and Zoopla will be allowing them to advertise or not ?
And is it not the role of us agents to put pressure on them NOT to allow these “new kids on the block” to even get a foothold. After all it is us that creates their multi billion pound valuations !! Bite the hand that feeds them and all that.
Whatever anyone thinks about Agents Mutual – at least we can rely on them not to allow them to advertise.