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How fair is Purplebricks’ new ‘money back guarantee’ promise?

Hybrid agency says trials of new pricing structure in the NW of England went well and will be rolled out nationally.

Nigel Lewis

Purplebricks bricks has announced that it is to launch its new pricing model this month following trial in the NW of England.

This is to include a new Money Back Guarantee (MBG) and simplified two-tier proposition being rolled out nationally following successful in field research and trials.

“We are excited to be announcing the conclusion of our pricing review this morning,” says CEO Vic Darvey.

“The Group has responded to a changing market and we are delighted to offer customers an option of reimbursement of their upfront fee payment if they do not sell their home.

“This illustrates our commitment to giving customers the best service at the best price and we are very excited about the growth opportunity this new initiative will drive over the next few years.”

Purplebricks also say that the price strategy switch is part of a plan to present a ‘Purplebricks 20’ and that it now has the ‘right management team, right strategy and right technology to continue to grow the business’.

Darvey has said in the past that in areas where the sales market is slow, its current fixed fee structure puts some vendors off. 

The announcement follows a strong year for the company ending April this year.

This includes revenues up by 13% to £90.9 million, instructions up 14% to 58,043, a fee income up by 22% to £87.1 million and the repayment of all its furlough money.

The company also made an overall profit last year of £6.8 million compared to a loss of £19.2 million the year before.

But its market share fell, down to 4.6% from 5.1% last year, a stumbling block as the company continues to say it will achieve 10% UK market share.

“This great performance has been achieved in the shadow of the Covid-19 pandemic, and it remains a great source of pride that Purplebricks has come through the year stronger than ever,” adds Darvey.

Purplebricks currently charges £999 incl VAT outside London and £1,499 incl VAT inside.

Money back scheme

“The terms of the Money Back Guarantee apply to properties marketed at the agreed valuation, allowing customers a refund on their full fee if they have not received a proceedable offer within 10% of their valuation,” says Purplebricks.

“We have a high level of confidence in the data originating from these pricing and proposition trials and are very excited about the growth opportunities these new initiatives will drive over the next few years.”

The company also says the ‘money back guarantee’ comes with other strings including that it will only be valid after 10 months and if all viewing requests have been accepted.

‘Feeling the cold’

Link to Stamp Duty featureAnthony Codling, CEO of Twindig, says: “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 hotcakes, Purplebricks was feeling the cold.

“The Money Back Guarantee sounds like a good idea and certainly addresses my former concerns, 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?”.

July 6, 2021

One comment

  1. Anthony Codling as an analyst I am surprised that you have not looked at the dtail of this moneyback deal. having marketed over 18,000 properties over 30 years here is what I know about residential sales in the UK. 95% of properties marketed, will get a proceedable offer 10% below the price – eg, 500k, that is an offer of 450K most agents could get that offer in 20 seconds, it then voids the refund. So the cash back concept is deeply flawed. The £6M profit this year comes off the back of probably £15M plus of money from PB vendors who failed to sell. I am encourgaed though that Purplebricks may yet get to where they need to go.

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