Purplebricks has quietly stung vendors in Victoria with a huge 33 per cent increase in upfront selling fees and increased fees by around 10 per cent in other states.
Supplied by Larry Schlesinger
Flat fee agents Purplebricks has quietly stung vendors in Victoria with a huge 33 per cent increase in upfront selling fees, right at the time time when the market is cooling in Melbourne.
Victorian vendors who use the UK-based estate agency will now have to fork out $5999 to sell their home compared with $4500 when Purplebricks launched in Australia in September 2016. Taking their home to auction, will take the total Purplebricks fee to $7369 compared with $5870 previously.
In Queensland, WA and South Australia, Purplebricks fees have increased 11 per cent to $4999 from $4500 previously ($6369 if auctioned) while in NSW they have increased 10 per cent to $5999 from $5500 with an auction taking the fee to $7369.
The shock fee increases, which went live recently without Purplebricks Australia publicising them, come despite chief executive Michael Bruce saying the Australian business was performing ahead of targets when interim results were published in London in December.
The fee increases will place the company's business model under further scrutiny after it was attacked recently by Real Estate Institute of NSW president Leanne Pilkington, who claimed flat fee agents were not a great option in a cooling market.
To date, Purplebricks has sold over $1.1 billion of property - around 2400 homes - with a further 1300 properties listed for sale on its Australian website.
In the UK, it is now the biggest estate agency by listings with a market value of over £1.2 billion ($2 billion).
Sources told The Australian Financial Review Purplebricks agents won't receive more from the higher fees, which are increasing so that the company can beef up its back office support, freeing up agents to spend time on winning listings and servicing clients.
Comment is being sought from Purplebricks Australia.
Independent Sydney agent Edwin Almeida said Purplebricks was a great consumer proposition, but said agents could not manage the volume of listings.
He also highlighted that the increased fees weakened the consumer offering, especially at the lower end of the market.
"In places like Western Sydney, estate agents are only charging a 1 per cent commission. So on a $600,000 home, they are only charging $6000, the same as Purplebricks, but paid only on a successful sale rather than an upfront fee,"Mr Almeida said.
Purplebricks does not disclose what proportion of the flat fee goes to its agents, but it is understood they earn between $1200 and $1500 per listing.
December interim results showed that revenue from its Australian business surged to £6.8 million ($11.9 million) for the six months to October 31 - up from £400,000 in the prior corresponding period, when it had only been trading for two months - with full-year revenue forecast to hit £12 million.
However, Australian interim losses more than doubled to £5.1 million as the company ramped up its marketing budget to promote the brand to Australian home sellers and local estate agents.