How do Purplebricks make money?

David Banks's picture
Authored by David Banks
Posted Friday, November 22, 2019 - 7:51am

Unlike conventional estate agents who tend to have bricks-and-mortar offices on the high street, Purplebricks has a very different business model. Put simply, Purplebricks is an online offering that markets properties to would-be buyers without much of the infrastructure of a traditional estate agent. Likes its main online competitors – such as Yopa, House Simple and Doorsteps, for example – this means that it does not need to charge the same amounts of money that most operators in the UK's housing market have traditional levied.

In fact, because Purplebricks does not charge a percentage fee based on the sales price of a property, many people wonder how it can make any money at all. Of course, when a home is marketed by a bricks and mortar estate agent, there is no fee that is initially charged. It is much, much more common for an estate agent only to levy its brokerage fee once a deal goes through. Although the rates of different estate agents charge vary from company to company, no fee is charged unless a sale is made. In fact, it is common for the conveyancing solicitor handling the sale for the vendor to settle this fee, as well as any legal fees that may apply, before processing the rest of the sale and allocating the remaining funds appropriately.

Since Purplebricks does not operate on this commercial model, how does it generate income from the marketing activities it undertakes?

Upfront, Flat-Rate Fees

By contrast with conventional estate agents' fees, Purplebricks levies upfront fees to sellers before their home is sold. This means that sellers ought to know exactly what they are paying for. Because normal estate agents charge a proportion of a sales price, their fee can go up if a higher price is achieved during the sale. However, with Purplebricks, there is an upfront fee which is the same or - more accurately – usually the same no matter what the asking price of the house is. With a flat-fee model, this is particularly attractive for people who own larger, more expensive properties, since their charges will often compare favourably with the percentage fees levied by competitors.

Due to its differing model, Purplebricks is able to generate an income whether a house sale goes through or not. The flat-rate model is attractive because it will often mean paying less. However, because the fees are due before the property is even marketed, there is always the risk of a sale not being made which means Purplebricks' fees would still apply. Helpfully, however, Purplebricks allows sellers to defer their upfront fee so long as they take up their conveyancing service.

How Much Does Purplebricks Charge?

Purplebricks charges £899 to market a property. This so-called flat fee is not the whole story, however. You will need to pay more if you live in London as well as in some postcodes in certain surrounding areas. Properties in, or near to, the capital are subject to a charge of £1,399. Bear in mind that Purplebricks considers this to be a lifetime fee which is not subject to further charges if the house does not sell immediately. You can leave it on the market with Purplebricks for years, if wanted, and even take it off and put it back on at a later date should that prove necessary due to your personal circumstances.

Valuations are made by Purplebricks without any charge but, in fairness, this is something that most estate agents will do for free. Before placing your home on the market with Purplebricks, it is worth noting that there are some extra fees which may apply. Firstly, if you need an energy performance certificate (EPC) to be produced for you, then Purplebricks will arrange for this at a charge of £84. Furthermore, if you want your home to be listed on Rightmove with a premium listing, then you will need to fork out an extra £125. Purplebricks also levies an additional fee of £149 if you want to opt for Rightmove's featured listings

Finally, Purplebricks does not offer accompanied viewings under its standard packages. If you want an agent to show would-be buyers around you home rather than do this yourself, then you will need to pay them £300. If you are subject to the London weighting charging rate, then the fee for accompanied viewings rises to £399.

What Do You Get For Your Money?

When you sign up to the Purplebricks service, your home will be listed on Rightmove, Zoopla, PrimeLocation and other common sites with professionally taken marketing photos. A floorplan will be produced along with sales notes and a social media marketing presence. You can also expect a local manager who will handle your account, arrange viewings and deal with offer negotiations. Finally, you can also expect a 'For Sale' sign, something that not all online estate agents offer.