Online estate agent, Purplebricks, has been purchased for £1 in a rescue deal by rival estate agent, Strike, after the company claimed to be just one month away from going under.
The company offers a free virtual selling service to sell homes across England, although for a fee there are ‘little extras’, such as marketing boosts and hosted viewing packages available. It says it can save over £4,000 based on a 1.5% fee commission on a property selling at £270,000 and has sold over £5 billion of property since its launch.
So what went wrong at Purplebricks, the company once valued at £1.4 billion? Purplebricks is not the first of its kind to fail; its demise follows in the footsteps of several others, Tepilo and Emoov perhaps the better known.
Sadly for home sellers, you don’t get anything for nothing.
The ‘free’ service on offer has to be paid for by someone – after all, who pays for the competent technical staff needed to provide the online service in the first place? How do you persuade Google to profile your website high enough in searches to be found? How do you persuade house buyers to look anywhere else but the go-to property website Rightmove, with its high listing fees? How do you reward your investors for their financial commitment in your company?
Everything costs. Yet Strike claims that 40% of its customers use the service for free. And the 60% of its users who are paying for add-ons is a diminishing number, with few properties for sale and an anxious property market worried about financial uncertainty.
Most of Purplebricks’ liabilities will be assumed by Strike, leaving around £2 million to be returned to shareholders.