We are thinking of selling our home and contacted Purplebricks as we saw their ad about flat fees. We would hope to get around $1.9 - $2m for our property so it would save us about $25,000 but they said their fee is paid upfront. Do you think this is a risk and is there another we could structure the payment?

The recent case of a Sydney home seller stung by a fixed-fee model proves why commissions are a tried and tested way of delivering good consumer outcomes.

Last weekend, the Australian Financial Review ran a story about a Sydney mother who hired a Purplebricks real estate agent to sell her Como home. The property failed to sell, leaving her with a $12,000 bill. According to the AFR, the debt is now being handled by peer-to-peer lender RateSetter, as the vendor chose to defer payment until the end of her campaign.

Purplebricks considers itself a disruptor and is one of the largest real estate agents in the UK. The listed company entered the Australian market late last year and has been marketing its flat-fee model to Aussies across TV and radio.

Vendors typically pay a flat fee of around $5,000, plus more for any extras tacked onto their campaign. This is in contrast to the traditional commission-only model used by real estate agents, who take a 2 per cent to 3 per cent cut of the total sale price.

The bottom line is this: commissions drive results. The agent is incentivised to sell the property for the highest price. If they fail to sell it, they fail to get paid.

Hi Liz,

There was an article in the Fin Review about this over the weekend, you should google it.

From my understanding you pay regardless of sale. This can be good if you sell but not so good if you don’t.

As with anything like this make sure you do your homework before committing to anything.

Regards
James

Hello Liz

Please forgive the dryness of my answer but otherwise I could write an essay on this topic.

As a seller you want to achieve the highest price possible for you home without outlaying or it costing too much to achieve a great result, so with this in mind be aware of the following.

An upfront fee means there is no incentive for the Purplebricks agent to even negotiate an extra $5k never mind an extra $50k.
In fact, there is not much of an incentive to even sell the property.

Compared to a traditional agent who is incentivised not only to sell the property but also to negotiate more for the seller which means more for the agent. There is less risk with a traditional agent as you only pay a commission upon a successful sale.
With your expectations ranging from $1.9m to $2m you need an agent that will negotiate at the upper end of that $100k difference

Most offices have a sales team, we met 574 buyers just last weekend who are looking in the Inner West area

Marketing is paramount but you don’t need to spend a fortune compared to the value of your home. These days your buyers make decisions with regards to viewing your home based on what they see on their phone, ipad or computer so photos, presentation and a strong digital presence is critical. The average buyer spend less than 2 minutes viewing a property they like but you have less than 10 seconds to get their attention in the first case.

Good luck Liz with your property decision whatever that maybe, but if you want to call me I would be happy to answer any questions you may have.

Hi Liz,
I think that it is potentially better to go with the commission model. A strong, long standing real estate office will have a data base of up to 50,000 people who your home will be marketed to over and above the traditional media campaign. Your agent is incentivised to achieve the highest price the market will pay for the best commission. I recently sold at the upper end of my range (not the agents) and happily paid $28,000 for their service.
While PurpleBricks are still quite new to the market, you may get what you pay for.
Best of luck with the sale
Regards
Scott