I need to rent out my house in Chiswick as my family moves to Kent. I took the opportunity to road-test the Purplebricks service and compare it to the traditionals. I was interested to see the calibre of the local lettings expert (LLE) and how local and expert they really are.
The traditionals I contacted were Savills, Orchards and Foxtons, strong in my area. I looked at Rightmove and had a monthly rental of about £2,800 in mind and they all came to value the property. The range of valuations from the field was £2,200-£3,200. Foxtons came in most aggressively on the rent claiming they would aim for £3,200 per month renting to a corporate looking to relocate staff. They did however want 25% of the income whereas the others were nearer 15% and Purplebricks at 7%. That meant Foxtons effectively kept all of the upside if it did get the higher rent. For Savills, my house happens to fall between two offices and neither seem to know the local market very well so they weren’t that strong after all. They lowballed the valuation at £2,200-£2,400. Strike out Savills.
The Purplebricks LLE who arrived covered a number of London postcodes and was open that he hadn’t had any instructions from the few streets near my house yet but he knew the main areas nearby (Zoopla tells me the nearest current PB rental is c.300m away) and had views on the sort of markets they appealed to. His valuation was data-led and came in £2,800-£2,850. He made the point that if the marketing process was strong, the price could be discovered and the high end aimed for. He recommended an open house for an hour each weekend. That way he and his team “could work all week generating interest and then show the home on the open day”. Now I realise this means less time and effort spent by his team on showing the house but I like this method as encouraging buyer competition (behavioural economics). It’s also less inconvenient for my family (and remember “happy wife, happy life”) and is generally more efficient. Orchards were quickest off the mark, showing a prospective tenant the house the same day under a one day agreement. The tenant indicated an offer at asking then withdrew it, for reasons I was never told.
All the agents who came to value were friendly and articulate but I remember “charming crooks do well in estate agency” (and in life more generally). They all pushed their unique market knowledge and tenant contacts, some more convincingly than others. The Purplebricks LLE (Local Letting Agent) claimed the most experience of all the agents with 15 years in the industry. Savills & Foxtons were the early-20s junior types, and Orchards sent the local a head of lettings who had 7 years. That is, anecdotally, reassuring on the calibre of agents PB is able to recruit. More on the LLEs background and ambitions later – I found them telling.
On fees, Foxtons again came at the high end with about £700 to get to the point of contract whereas the average was about £400. PB’s fees were about £300. All in, I estimate the cost of PB to be about a quarter that of Foxtons and 45% of the others – a significant saving.
From the conversation with the PB LLE, I gleaned that every LLE (and LPE) has a registered Ltd company which can either use its own accountant or pay Purplebricks to use theirs. My LLE used his own. They are all registered with The Property Ombudsman, have professional indemnity, employers indemnity, public liability, registered with HMRC for anti-money laundering, data protection and car insurance for estate agency purposes.
The personal story of the PB LLE was interesting to me. He left his job as branch manager for a large estate agency to escape office hours and planned to move to northern Europe. His family had already preceded him when the Purplebricks opportunity came up a year ago. He’s now moving them back to London believing he’s “won the lottery” with the PB opportunity. He covers the postcodes W1 to W14 and also TW. I asked him how he managed such a large area and he replied that he felt PB gave him “massive support” in both manpower and through the platform. He has 4 sub-LPEs working for him, including 2 who only do viewings and can take on more if required. If he wants to hire another sub-LPE he asks central office for candidates. They vet applicants and pass on a selection to him to decide. Understandably, the LLE felt empowered through the process, as though the central office were working for him while he was free to hire the person he wanted to work with. He could also supply his own candidate who would be interviewed centrally before being approved.
A further interesting sign is that the LLE’s ambitions. He is hoping PB will launch in the USA soon so he can “buy the license” for some of the big US cities. Despite never having worked in the USA, his plan is to secure the license using his track record of good performance as an agent and by outbidding the competition, then take on a team of local sub-licensees to deliver the service. He felt that the Purplebricks Group would not launch without a strong understanding of the market and having modified the platform to match. He expected that PB Group would then train and support him to succeed in the market. He wasn’t put off by the notoriously competitive US market: “I’m pretty competitive myself”.
Learning about their operations on the ground, the LLE had a gentleman’s agreement with other nearby LLEs/LPEs (there are 14 LLEs in London and more LPEs) to help out when he’s short staffed. There’s no organisation of that through the PB platform but management apparently knows about and encourages it. He pays the others informally. Being a banker, I asked him whether that could work long-term – where’s the incentive and wouldn’t someone eventually feel that they were over-contributing and being under-paid? My LLE thought it was an essential part of both their businesses and is a widespread practice in the industry and, therefore, that it would endure and as they both paid to keep an arrangement valuable to both of them. He thought most LPEs and LLEs were of at least branch manager level in the industry before moving to PB and where therefore familiar with similar arrangements.
The time had come to lay the bet on who best serves my needs. Who did I go with. Yes, I instructed Purplebricks. The photographer is coming over the weekend. As an analyst I see its model as part of the future. As a customer, the real test is the ongoing care and tenant management. Let’s see how they do. I chose them as they offered what appeared to be a similar service in terms of goals, only more slick with regular information available at much lower cost.
The MyPurplebricks.com section of the website is slick but despite me being a lettings-only customer it clearly has a sales bent. Given the fact 97% of PB’s current instructions are for sales I can understand why this is but shows to me it’s a sales led business at the moment which is being leveraged by experienced lettings agents where it makes sense to do so. The CEO says he’ll get on to lettings in earnest at some point. At the moment he seems more driven by international expansion with the launch of Australia and, I suspect, more to come including the USA. So my LLE has reason to stick with them and to hope to “win the lottery” a second time.