Purplebricks Money Back Guarantee
There were two highlights in the Purplebricks results this morning. The launch of a money-back guarantee and the growth in instructions. However, once the dust had settled the highlights were not as high as we first thought.
Purplebricks launches a money-back guarantee
The Money Back Guarantee sounds like a good idea and certainly has the potential to address my former concerns (where you end up paying the fee whether or not you sell your home), it applies to properties marketed at the agreed valuation, allowing customers a full refund on their full fee if they have not received a proceedable offer within 10% of their valuation. The key will be the definition of a 'proceedable offer' and does the ‘full fee’ include the ancillary services you may have already paid for.
Is the devil in the detail?
Possibly. We discuss below the Money Back Guarantee (MBG) Scheme terms as detailed on the Purplebricks website on 6 July 2021. We note that these terms and conditions may change and so would recommend potebtial customers to check the terms and conditions before instructing Purplebricks to market your home to check that you are happy to accept them terms offered.
What is a proceedable offer?
“Proceedable Credible Offer” means: an offer in excess of 90% of the valuation price where the prospective buyer passes required checks, including Anti Money Laundering, provision of valid proof of funds and source of funds.
This does not mean that you are able to get a refund if Purplebricks do not sell your home. It means that you may be eligible for a refund if a qualified buyer has not made an offer of at least 90% of the Purplebricks valuation of your home. If your home is valued at £250,000 and you receive an offer of at least £225,000 from a qualified buyer you are not eligible for the Money Back Guarantee.
How long must the property be marketed by Purplebricks to qualify?
From the Purplebricks website: The Vendor(s) is therefore required to continuously publish the Property with Purplebricks for a minimum period of 10 months. If the Vendor withdraws the Property before the end of the 10 month period the MGB is void and no refund will be made. If the Vendor appoints an additional agent and an offer is accepted via this additional agent before the expiry of the 10 month period, it will be classed as withdrawing the property and no refund will be made.
What fee is refunded?
At the time of writing, only the Base Fee is covered by the Money-back guarantee
“Fee” means: The money you paid to Purplebricks to market your Property. It does not include an EPC or Home Report or any legal fees which are excluded from the MBG
Purplebricks 2.0 or Estate agency 1.01?
The CEO described the changes and advances announced today as Purplebricks 2.0, but is the money-back guarantee just a case of Estate Agency 1.01, where you only pay if you sell your home, or in Purplebricks case if you have a ‘proceedable offer’?
With the average house price in the UK, around £250,000 and Purplebricks average fee £1,501, does the Money Back Guarantee imply a traditional fee of around 0.6% and may it lead to further fee erosion in the estate agency sector?
Or is it the case that a buyer is unlikely to accept an offer 10% below the asking price even if it is proceedable. Would such a low offer call into question the quality of the initial valuation?
Purplebricks losing market share
Instructions may have increased by 12% in the year to April 2021, but for the market, as a whole transactions were up 14% and if we look to the second half, which was fuelled by the Stamp Duty Holiday, Purplebricks instructions increased by 19% but overall housing transactions increased by 53%. In a market where homes were selling like hot cakes, Purplebricks was feeling the cold.
The Group believes that "Our model is now more relevant than ever, as customers continue to be more comfortable buying and selling their homes digitally". We appreciate that we are all doing more online because of the pandemic, but Purplebricks instruction figures suggest that they haven't got the formula right just yet.
It will be interesting to see if Purplebricks has hit the digital nail on its head with the money-back guarantee.