The Telegraph in the UK reports that in the past 18 months, the Advertising Standards Authority has banned seven of Purplebricks’ adverts, and the number of complaints upheld by the advertising watchdog against all property companies for misleading adverts has grown by at least 45 per cent so far this year.
The ASA said that its TV ad had not made it clear enough that it charged a fee to list a property even if the house was not sold. The latest ruling hasn’t seemed to make a dent on Purplebricks’ investor sentiment, with its share price up more than 1 per cent.
Meanwhile, it has been a month since Purplebricks launched in the US and while it is too early to gauge success, real estate tech strategist Mike DelPrete says they need to be taken seriously.
“Purplebricks is a large, serious, international player with plenty of momentum and experience, with deep pockets,” Mr DelPrete says.
“It may not revolutionize the real estate market overnight, but it will have an impact.”
Purplebricks are planning on spending $2 million per month on advertising to raise awareness and generate leads. This spend extends to online, TV and radio.
The business model in the U.S. is similar to the U.K. and Australia where Purplebricks charges a listing fee of $3200, plus the typical compensation paid to buyer’s brokers (typically between two and three percent). Sellers must pay the fee regardless of whether their home sells.
At the core of Purplebricks’ business in the US are the local property agents, called Local Real Estate Experts. After one month in the market, Purplebricks currently has 24 licensed agents operating in the launch market in Los Angeles, California. This compares to over 650 local property experts in the UK, and over 100 in Australia. Purplebricks U.S. currently has 12 listings, nine of which are for sale, and three of which are pending.
Mr DelPrete says: “Yes, in isolation 12 is a small number, but remember that this is a new business. Getting a new listing every 2.5 days isn’t bad for a new entrant in its first month. But let’s see how it grows from here.”
