Low fee estate agencies, particularly Purplebricks, have come under fire from the CEO of Spicerhaart, who says the downward push on fees has worsened standards across the industry.
Where estate agencies would previously charge around 2% commission on property sales, rates are down to just over 1% on average, with fees and profits slumping as costs have escalated, according to Paul Smith.
He said: “The inevitable consequence of this is that standards have slipped compared to a decade ago, making the experience worse for both customers and staff.
“These so-called ‘disruptors’ came into the industry offering a tech first experience, but we only have to look at Purplebricks to know that these low cost models are unsustainable and don’t make money. All that’s happened is that everyone is now charging less for their services and the whole sector is far worse off as a result.
“Where estate agents earn around 10% of the fees charged, that gives them just £99 from a £999 sale. The traditional negotiator would have earned an average of £450 on a 2% sale. Which commission is going to attract the very best in our industry?
“Everyone needs to realise that if Purplebricks has had a decade to make things work and still can’t, despite throwing many millions of pounds of investors’ money at advertising, it’s never going to work!
“Our industry needs brilliant people backed by tech, not the other way round. But most importantly, everyone needs to put their prices up and start to charge what they are worth.
“We all know that having low cost firms involved in a chain causes huge issues for everyone else in the chain because the staff aren’t there to deliver the service needed. Just look at Purplebricks’ negative customer reviews and you can see the consequences of not having enough staff to deliver the service required. The whole industry suffers as a result.”
With Purplebricks now ‘considering a sale’ and its share price tumbling to just 7.40p, Smith says it is clear the Purplebricks model has now failed and they have been ‘found out’.
He added: “The fact their most senior people aren’t estate agents says it all. In the current economic climate, with a buyers’ market, only the skilled estate agents will win. They needed people from grass roots level who had risen through the ranks, to deliver the changes required.
“We have also seen significant interest from Purplebricks’ staff applying for the jobs we have on offer all over the UK and will certainly welcome the best to join us.”
Are Purplebricks finished? And what about everyone else?
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