Purplebricks

I like:

1. An alternate way to sell.  The provision of options to the consumer is a positive development.
2. Their combination of technology and human resources to lower property transaction costs. A fresh approach from the tech heavy ‘for sale by owner’ sites and full service agents.
3. Their consumer pitch. It is compelling, “Don’t pay an agent $20,000+, pay us $4,500 to sell your home. We’re transparent with offers received and inquiries, available 24/7, advertise on the same websites, take professional photos and we’ll even do the open homes, just sign here”.

I don’t like:

1. Misalignment of interest. There is a clear disconnect in incentive if PB is paid even if the property doesn’t sell.
2. Inferior outcomes. I frequently see agents deliver exceptional outcomes due to intimate market knowledge and leveraging buyers who’ve just missed out on similar properties. Throwing it online and standing at the door may work, but it rarely delivers above market value outcomes.
3. Their very loose privacy policy. A couple weeks after providing my phone number to PB, I received an unsolicited called from a mortgage broker.

Takeouts

• Investors are willing to back a property disruptor, with traction.  Thanks to it’s compelling consumer pitch, PB will continue to be provided runway until this traction wanes or it becomes apparent that profitability isn’t achievable.
• Traction is continuing as PB expands into foreign markets, where initial traction is easier. It is a way for PB to extend their runway.   It is becoming harder in the UK as traditional agents react by offering hybrid models and numerous PB copy-cats appear.
• PB’s path to profitability is difficult to envisage as it is currently structured, as such small margins are dependent on huge scale and market penetration.  That said, PB many not need to generate a return from selling properties, there are a lot of ancillary services to a property transaction.
• Agent fees are on the decline.  Our small exposure to vendors aware of the PB offering is that they are using it as a way to negotiate lower fees with agents, while still deciding to use that agent.