Will Purplebricks and other low fee agents survive?

Will Purplebricks survive once investors’ money runs out and are investors facing painful loses?

This is an interesting article which was published in The Telegraph on 27th January 2016, where Questor expressed concern over the new online Estate Agent, Purplebricks.

Purplebricks, the online estate agent, has endured a tough first month of listed life. Questor would avoid the shares as they look highly overpriced, even after falling 18pc since coming to the market.

The company listed on the Alternative Investment Market (Aim) in December, with the shares valued at 100p, giving the entire group a market value of about £240m.

The idea of cutting fees for selling your house through a “hybrid” model of a website and a network of estate agents is growing rapidly. Purplebricks is reporting stellar revenue growth rates, but investors need to remember this is from a standing start.

Revenue increased by 777pc during the six months to the end of October, compared with the same stage a year earlier. The second half has started well, with a 275pc year-on-year rise in revenue. Instructions in January are on target to hit 2,000 for the month.

This kind of growth isn’t cheap. Once advertising and marketing costs are taken into account, the loss before tax widened to £6.4m in the first half, up from £2.5m a year earlier.

The company still has enough cash to keep going, with £22.8m raised from the markets in December adding to the £9.7m it had in the bank at the end of October.

The issue here is whether Purplebricks will ever make a profit, and why it has come to the stock market at such an early stage. The company faces fierce competition from rivals such as eMoov, Housesimple and easyProperty, and will have to spend heavily to fight for growth.

Questor would avoid the shares because the company should have achieved a solid track record of sales and profits before listing. There is way too much risk, no profits and that exposes shareholders to painful losses. The house broker Zeus Capital forecasts pre-tax profits of more than £8m by April 2017, but this looks overly optimistic. Sell.

 

This makes an interesting read but what does all this mean if you are looking to sell a property?

We think alarm bells should be ringing. The biggest mistake a seller can make in selling their house is to choose their agent based purely on the lowest fees. Sadly this is how some sellers decide upon their Agent. Why would anyone trust the cheapest agent to probably sell their biggest financial asset? Surely you want to achieve the best possible selling price for your property and know who you are dealing with? Preferably an established, local and professional firm, rather than a low fee agent. You should expect a personal service, attention to detail and an individual who takes the time to listen to your personal circumstances. When selling a property it should be all about you.

Our advice would be to make sure you speak with a company such as McEwan Fraser Legal rather than only considering low fee agents, so you understand what you potentially stand to lose and can then make an informed decision. We really know the value of property on your street we are motivated by achieving you the best price for your property, nothing else.

 

So what must sellers consider if tempted to use a low fee online Estate Agent?

The most important thing to consider, and often over looked is, which agent is going to achieve you the highest price for your property?

Low Fee agents are great at claiming what they can save consumers but none of them make any claims or reference to what they have potentially lost clients by selling properties for less than they are actually worth. If low fee Estate Agents offered everything a traditional agent offered why would everyone not just use the low fee online agents? The truth of the matter is it’s the common law of business balance which prohibits paying the least and always achieving the best results- it sometimes works out, but invariably someone loses out. You have to always factor in the risk, but why anyone would take the chance with possibly their biggest financial asset is just beyond us.

There are so many unique ways McEwan Fraser Legal can maximize your selling price and we would strongly recommend that sellers understand how this is achieved by meeting one of our experienced Valuers. Considering all the options when picking your Estate Agent is essential, not just picking the cheapest!

Watch our video testimonials from clients who used low fee agents and changed to McEwan Fraser Legal.

Of course every company gets bad reviews from time to time, but still we wanted to share with you some of the issues raised in some of the recent Low Fee Agent reviews we have just seen. These reviews reiterate what we have tried to explain above and will hopefully help in making sure you consider all the options.

Low Fee Agent reviews:

Review review 2

And a link to another: https://www.aspokesmansaid.com/complaint/55c85e442e12ae0fd81a15bd/paid-for-failure

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