Purplebricks reveals massive cost-cutting measures to stay afloat

Time will tell whether the "digitally-led" marketing will work. That's the problem with TV advertising - once it stops, people forget about you. Had the money been better spent on building their own media platform, they would have those subscribers already in place.

So am I correct here that vendors can pay and launch a property with home made photos and the only buyer they could get is a vulture buyer if at all?

If anyone does this they should seek help or talk to us for real advice!

I have to say, I am still bemused as to why agents are listing new properties? Are people really going to make viable offers on a property purely viewed on-line and more importantly see it through once they have the opportunity to view directly, whenever that might be. We have advised the opposite to our clients, where we have actually recommended to withdraw properties and re-list at a time when things return to some form of normality. By all means let me know if I am missing something here!

• Paul Robertson
• 30 March 2020 09:40 AM

Thank you Keith, I have advised our clients the exact same thing. To carry on stating virtual valuations and virtual tours will sell your property I think is doing us a great dis service as a profession. We all know that 99.9% of buyers will not purchase a house unless they can physically see the property. I cant help but feel this is online agents still trying to milk fees from stressed sellers and hope it comes back to haunt them when sellers realise they have been fooled. As an agency we have done 360 tours and 4k videos for years and never once did we sell remotely, what it did do was get potential buyers through the front door which was the objective the whole time.

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As a Proptech Real Estate Analyst in many ways these times are the most interesting - for me the future is a cup of tea. TEA, Tech Enabled Agents, property professionals with a suite of digital tools to run efficient businesses, where Estate Agents and Proptech meld and just become 'agents'.

Sitting in the opposing corner is an other model, technology to run a model where the agent is nowhere to be seen. This is the advanced model that Purplebricks is now looking to advance, a direct service where vendors self-list - removing that troublesome overhead of the Lister / Local Property Expert (those hardworking much pressured backbone of the online model).

Gary Keller, yes he is not exactly a local agent - has for some years been developing technology to empower the agent, it seems Purplebricks is the exact opposite of this model. Who will win well for this onliner it looks like the cash is about to run out. In April 2018 Purplebricks had 152M cash at bank, this April that will have reduced to around 35M, that is a 117M cash burn in 24-months, or a £4,875,000 cash burn a month.

I revealed on the 2nd of March in a Daily Telegraph article that in 2019 Purplebricks had 21,380 vendors who de-listed their properties. Leaving over behind 18M of fee they had paid upfront. Following this revelation the share price fell off a cliff.

Marketing and selling property is all about trust, as Rightmove is now finding once that trust is lost - things soon unravel.

I am extremely sympathetic to any person hit by this terrible situation we are now all facing, and I think Local Property Experts, those very hardworking, self-employed (debatable) workforce who props up this online Behemoth, are now going to find things even harder, a shame that all those millions went on Olympic adverts rather than a contingency fund to help them during difficult times.

Doing the mathematics, Purplebricks unlike a traditional agent, has no 'pipeline of sales' to live off, its income is from upfront fees and cross selling of services at point of instruction. With lock down, the amount of new instructions for all agents will stall.

As to changing to a leaner model, Puplebricks Achilles heel has always been its lack of physical offices, if it cuts its advertising - it ceases to exist.

Without adverts on the tv, massive online spend - the fickle general public will soon 'forget' the brand, and maybe this is a bigger challenge than the £4,875,000 cash burn.

Even with reduced overheads, it will eat through that £35M very quickly, but before it doers the market capitalisation will be so low that either a buyer will swoop in and buy the company, or Axel Springer will take it private and hopefully look at the model and start again.

Keith Russell’s comments were accurate and realistic. There is far too much smoke and too many mirrors at play within our industry at this current time. “Business as usual”, it is not. Neither are virtual valuations and viewings the solutions to clients selling their homes.

Who, honestly now (scavengers and auction investors aside), is going to commit to survey and searches on a family home they’ve never visited?

Even if they could find a surveyor to attend, just one problem revealed and the risk will be too great. There is simply no desperate need for anyone to prioritise moving house during this horror show unless they have already committed.

What we are seeing from agents, both small and substantial, is a desire to stay relevant and stay at the forefront of customers minds. Listing houses (let alone achieving completions of new stock during this mess!), must be borderline against a clients best interest, rather than working for it.

• Paul Robertson
• 30 March 2020 10:01 AM

Exactly Mark, Keith is spot on and I could not in all good conscious tell a client putting their property on the market now will actually get a sale. Based in Scotland surveyors are not doing home report for a minimum three weeks so why online agents here are still stating they can market a property is beyond me. Solicitors cannot register titles so completions can't be fulfilled even if you got a buyer and buyers are not viewing properties and sellers don't want strangers in their house. I cant help but feel that because alot of online agents offer finance for pay later options (they get their money within three days from the finance company) they couldn't care less if it sells or not as long as the money keeps coming in by any means necessary.

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I can understand why agents that are doing it feel the need to list new instructions, they have numbers to hit which are now essentially unachievable this year, and of course up front fees put some cash in the bank now, but agree with sentiment above, it is not in a vendors best interests at all and creates a huge credibility issue that could cause much more damage later on. Time should be better spent on preparing for the end of this lockdown talking to people, data mining and setting themselves up for when it is over, considering how to upscale the business that is inevitably being run very skinny at the moment when normal trading activities are allowed once more. Instructions should be accepted on a deferred basis like a lot of agents do in December, advice should be not to list now.

I dont see any value in these virtual viewings and valuations suggesting that we continue as normal, especially when the government has very publicly put the housing market on hold, looks desperate in fact. Any supposed purchase will still be conditional on a physical viewing at a later stage whether they know it now or not, conditional on them still having a job, conditional on them having the same confidence they may feel they have now. Inevitably you will never achieve as full a price now as you would be able to in what was a looking like a promising Spring market, and anyone making an offer will be opportunistic. Any deals put together now will be held together will sellotape and not worth booking.

Similarly, with very little underwriting taking place, surveyors at home, councils closed, any deals done will be no further down the line than when the lockdown ends, so I don't see what is to be achieved with a business as usual approach for anyone, agents included.

So this makes them effectively a listed by owner offering with no expertise. Surely puts them in breach of their Rightmove and Zoopla contractual terms that we all abide by?

• Colin Bain
• 31 March 2020 00:55 AM

Yeah but rightmove won't want to annoy their biggest customer

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All the LPE's will be earning Zero for months as they cannot visit homes to list property. Even then there will be a reluctance to sell _ the beginning of the end ??