Purplebricks saga: who won? Final instalment

So my house was being viewed but hadn’t rented after 5 weeks of marketing. All three agents expressed surprise that it hadn’t rented as they claimed (in the two traditionals cases) that they had rented worse houses for similar amounts previously and (in PB’s case) it seemed well priced vs others on Rightmove.

The viewings had been ok. I had no idea who Foxtons and Orchards had shown around the house. Sometimes I only knew they had been there because they left the lights on when they left and had to follow up to find out who it was and ask again for prior notice. As an aside, Foxton’s handled these professionally at least. Orchards just with denials or ignoring my request.

I moved out of my house without having new tenants lined up. While that made the move less stressful, it meant I was paying both mortgage and rent. Now, I don’t claim financial distress unless it’s bonus time but I don’t like throwing away cash so I pushed all of my agents to come up with a solid offer on the house. As any landlord will tell you, it’s the voids that kill you.

Both Foxtons and Orchards pushed for a reduction in price – until this point neither had tried to talk down the price. Its agent practice to just agree with a landlord’s hopes for price then to let the market talk them down when it doesn’t rent. This is classic “blame the market, don’t blame us”, which is fair enough – I’m sure it pays an agent to be the bearer only of good news. I agreed and they reduced to £2,500 with Foxton’s getting a good uptick in viewings with four in the next two days. Orchards got zero and Purplebricks (already at £2,385) got one.

Foxtons said they were sure they could land an offer but Purplebricks got in the first one. It was low –  £2,100 per month. Remember the valuations back in July ranged from £2,200 to £3,200 and I had hoped for at least £2,500 – but PB’s tenant could at least move in immediately and wanted no work to be completed (the new stair carpet ordered with Carpetright could be cancelled). After negotiation (he claimed other properties he was seeing, I claimed other tenants interested) I got him to £2,300. I say ‘I’ as that’s what it was – despite the PB LLE being involved in negotiations, he was actually only passing messages between us, not pushing the tenant as I would have liked.

Then Foxtons got in an offer at £2,500/month. Sound good? Yes, except the tenant had a 2 month notice on their current tenancy and they couldn’t afford an overlap. I calculated that the PB offer with no void and PB’s fees would net me £24.8k by the end of the year. Foxton’s offer with void and Foxtons fees would only net me £20.4k. Not only that but with PB’s ‘free’ rollover of tenancy (they just keep taking the 5% monthly fee) and Foxton’s taking another 9% for rollover on top of its 6% monthly fee, Foxton’s offer would never net me more than PB’s no matter how long the tenant stayed for. Foxtons was killed by the fee (and void).

I run some more numbers. Because of its fees, a Foxtons offer – even with zero void – would need to be at £2,550 to match PB’s £2,300 in terms of cash in bank after fees. Financially I should accept PB’s lower offer even if that was effectively passing on most, but not all, of the saving from PB’s lower fees to the tenant. It was still more £ in my bank account. Bear that in mind when someone tells you PB doesn’t get you the best price.

So I accepted the Purplebricks offer. Once the offer was agreed, the property was taken off the portals. That must have reassured the tenant. When I rented my house in Kent through a traditional – Savills – I wasn’t sure if they were still showing the house to other potential tenants while we were sorting out the paperwork.

My LLE then handed me over to a CPE/Central Property Expert from PB’s central office. As I’ve written before I see value in freeing the LPE/LLE to perform their value adding functions and handing over the management and paperwork to central office so I was happy with the move, hoping for an efficient service. That mostly proved to be the case. The CPE sent over the documents for digital signing and was responsive. I could contact them on their mobile – PB seems only to use mobile numbers which I like – you can text them instead of calling. With ongoing management that’s a useful difference.

The process continued with check-in inventory (£120 from PB) and gas safety checks (£84). You don’t need to use PB for either but when it’s one click to get them done or googling and finding alternatives, it’s an easy decision. It was also PB’s opportunity for upselling. Electric safety certificate? £200. It’s not compulsory but you can be sued if something happens and you don’t have one within the last five years. Legionnaires risk assessment? £90. Again, it’s not a legal requirement but the law is clear the house must be safe and how do you prove that without one? It is a legal requirement to have smoke alarms in common areas (£60 per alarm) but I already have those. The prices are reasonable and solves each step so very easily – a big  plus for the Purplebricks service. I have some buy to lets so know I can pay about 70% of the price PB charges for these ‘legals’ but would have more hassle. The PB proposition is a good one, especially for inexperienced landlords.

Then came some PB screw ups. My tenants are a married couple who both work. It’s industry practice for all working adults in the house to be on the tenancy agreement – a simple move that better protects the landlord for no cost (as the individual credit reference fees are charged to the tenants). It’s so obvious I assumed it to be the case but PB only put the husband on the tenancy. It was late in the process when I noticed, the tenant took it as an attempted renegotiation and time was tight so I accepted a single name on the contract. Unimpressed by PB. I enquired about landlord rental protection from PB . That feels like rewarding a failure but again it was made so easy. An insurance agent called who had all the information from PB, including the tenant’s credit check, so they simply said its £125 for 12 months with no excess. £125 to protect £27,600 of gross rent for a year, all except the first months missed rent. I haven’t taken it yet, but I’m tempted.

PB then sent me an email to say they didn’t have my bank details for the rent and to call a number to register them. I called and a nice lady told me they did have bank details for that property and told me all my information in a display of poor data security. The central service should know better.

And a minor annoyance – the tenant called me yesterday with some issues. They had called Purplebricks, who told them to call me as they only collected the rent. That surprised me as it’s supposed to be fully managed service. I contacted PB and asked them to start managing it.

So final results? PB isn’t perfect. It didn’t get me the best price but it was the best offer. If the other agents dropped some of their fees they could beat PB’s offering but that will be hard with their higher cost bases.

When the tenancy comes up for renewal, I’m tempted to remarket the house it to see if I can get that £2,500+ rent without voids and still have PB manage it. If I do I’ll use Purplebricks to try again and Foxtons but will drop Orchards and try another (probably Winkworth).

So it’s been insightful. PB brings a lot of strengths in the lettings process and platform but it can clearly improve, mainly with better local knowledge which will allow them to get better rental prices. But it’s good enough to be competitive, even compelling but also its clear that a good traditional agent could also justify higher fees, especially if it can reduce them from current levels using proptech for the mundane parts of the process, as I’ve written previously.

 

Would I recommend PB to customers? For lettings, if PB is already established in an area (and I mean your road or a few roads nearby) and you like your LLE then yes – they bring something positive to the table. I wouldn’t recommend them as sole agent but I think using a sole is a bad idea anyway. Note PB’s price moves from £1,000 to £1,500 if you don’t use them as sole. If PB isn’t established near you, it’s less easy. You’ll probably have to be the source of local information and keeping the advert fresh yourself. If I was selling my property then I would use them but also some traditionals as I’d be sensitive to selling price. I’d also remember that Hamptons currently pay you back half your hybrid fee if you use them.

 

Would I recommend PB to an estate agent? If you’re a branch manager I can see the appeal of leaving your current job to take a PB license over your patch, if you can get it. You’d solve the weaknesses I experienced and be well supported by the PB platform which would look after the boring day-to-day admin. BUT I know agents care about brand names and feel PB is at the lower end so I question if PB is really attracting branch managers or ‘reds’ (aggressive sellers). Time will tell with that.

 

Would I recommend PB to investors? Yes, I still do. That’s obviously based on growth numbers and the 121% at H1 was strong. From the product point of view (which is what this exercise is about), PB offered a smoother, faster journey at a better price and it was actually more professional because of it. The weakness is in LLE/LPE intensity meaning local knowledge and whether they can get the best price (both lettings and sales). And that wasn’t proved in my case. But overall its good enough to take more share – first from the other onlines (as I emailed about last week) and later from traditionals as PB becomes more established. There are other compelling hybrid models out there and space for the traditional model but with my use of its service and analysis of the numbers, Purplebricks is the one to invest in. I am also on the look-out for a hybrid that has a good paid on completion model as I would consider hedging with that.

Summary of the PB service:

Pros

PB platform was far more pleasant to use and kept me well updated compared to the traditional service;

The information provided on viewers and the ability to message them was great;

The service from the LLEs was attentive and responsive;

They could actually use text messages and the app for communication and didn’t insist on calling repeatedly;

Electronic signing of all documents and arranging statutory requirements;

PB ended up coming up with the best overall offer and most suitable tenant (seemingly – only time will tell).

 

Cons

LLE’s local knowledge was scant- he hadn’t let in the area before;

The basic quality of the text advert was shaky with frequent mistakes. The LLE believed the photos sell the house alone (see next point);

They took mediocre photos (not impressive, given previous point), didn’t use a wide-angle camera and preferred the photos I gave them. They didn’t check those photos were the right size so the advert looked good on mobiles and tablets but poor from desktops for a while – again pretty basic mistake;

PB didn’t get the most viewers (Foxtons got 10; PB 5; Orchards 4)

CPEs screwed up names on the tenancy (other mistakes minor but they were there).

 

I’m left wondering if they had done better on the above, would I have got a better price? I passed on most of their lower fees to the tenant. It means I’ll probably remarket in a year’s time.

I found PB’s service good enough to take share from the existing agents, especially as, in my area, there were no lettings specialists. I expect hybrids to take significant share but there is room for the traditional model, just more lean, cheaper and using more proptech for efficiency. The most compelling argument for that view is the Which? survey out recently that showed ‘only’ 45% of homebuyers found their house using portals. 39% using ‘traditional methods’ (estate agent window, registration with agent etc) and 19% using methods applicable to both (for sale board, word of mouth). I expect that will move more to portals but the 39% is telling that, for now, there’s space for some good traditionals.

Now we know what PB’s lettings service looks like from the users side. It’s been a saga but a useful one.

Have a good weekend

 

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