On Wednesday Purplebricks announced that they’d be closing the doors on their Australian operations.
Lowest fee models in any industry rely on high volume turnover to survive.
Purplebricks spent $20m in advertising – far more than what they were making – to try and win market share in Australia. And when that didn’t produce the results, in my view primarily because they performed so poorly selling property after it was listed, the flaws in their model were exposed and the business became unsustainable.
The Purplebricks model relied upon sellers believing they’d get exactly the same result selling with Purplebricks as they would selling with any other agent, but pay less to do so, thereby saving money.
It completely ignored the difference that agent competence, processes and local market knowledge can make to a selling outcome.
Now if the only way that an agent is able to win listings is by working for the lowest selling fee, what does that say about their level of skill and competence?
Combine this with tough market conditions, where agents have to work really hard at the process to secure offers, good prices and selling results, which was where the cracks in the Purplebricks model really showed, it was bound to fail.
Whilst we’ve seen the last of Purplebricks in Australia, we haven’t seen the last of discount fee & self service real estate selling models. But it does show sellers and prospective new competitors that success in real estate takes a lot more than just putting a property onto the internet and having a home open.
Purplebricks is a lesson in you get what you pay for.
If you want a great result selling, engage a skilled and competent local real estate expert with superior process and market knowledge. The cheapest agent is the one with the lowest fee, it’s the one that gets you the best result.