An estate agency expert
says that Purplebricks’ business model has ‘gaping holes’ and its marketing
budget is ‘way too flamboyant’.
In an article in The Spectator James Max considers whether sellers should use an estate agent. He says he can understand the appeal of the fixed fee model for sellers. However, he proposes a number of reason why this model is flawed, chiefly that it does not incentivise agents who, in addition, don’t have the same understanding of the market, nor buyers and sellers, as traditional agents do.
Max also says he believes
Purplebricks’ marketing overheads are an issue. He comments: “The recent ‘sell’
notes on Purplebricks aren’t just because of the over expansion in the US and Australia. The model has gaping
holes and the marketing budget is way too flamboyant. The departure of the
firm’s founder and the drop in share price is just another indication that all
is not well.”
Max says that until
recently he was on the UK board of one of the largest firms of UK property
advisors which owned an estate agency brand, and in 2006 invested in a
disruptive agency offering a fixed fee model which ‘did not end well’.
Max’s comments will no doubt win cheers of approval from conventional estate agents. However, others may point out that, in the UK at least, Purplebricks’ model seems to work, kind of.