Purple People Eater: Why Purplebricks Will Improve the Real Estate Industry

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Purplebricks is not going to revolutionise the Australian real estate experience. But it may very well improve it, and for the better.

For those not of the industry, a potted history of Purplebricks:  a UK-based technology business, Purplebricks offers fixed-price property marketing which purports to upend every market it enters. They’re best thought of as a technology and data company, in much the same way as Uber and AirBnB are: they don’t actually own assets such as physical agencies – they own technology and systems. They’ve got money to spend on PR and (because they’re clever and know which way their bread is buttered, unlike many of the old guard of our existing property industry), they’re engaging in both a traditional and digital media assault. Which is frankly what you have to do if you’re wanting a startup to do well.

Many agents have been proverbially sh*tting purple bricks at the thought of their industry being disrupted. If you’ve been getting your knickers in a knot about the entrance of Purplebricks into the Australian real estate market, it’s more a revelation of your potential professional weaknesses than of their ability to destroy your livelihood. Here’s why:

  • If you lose a listing to Purplebricks, you probably deserve to. Ouch. Right? Purplebricks listings are much like the infamous ‘chicken raffle’ listing, where four agents are called in to complete appraisals within a week. These listings are really a race to the bottom, where a decision by a vendor is based primarily upon agent cost because nobody did their bloody job and prospected them properly. Agents who have ongoing relationships with potential vendors based on true prospecting – which is offering information over a long period of time, paired with personal service and a sense of intelligent delight –  will not lose listings to Purplebricks. That’s because their offering isn’t based on a fixed price. It’s based on expertise, accountability, an actual relationship and (most importantly) – reciprocity. Purplebricks will undoubtedly appeal to some vendors – those who haven’t been prospected, those who are very price driven, and those who think they are the expert. The first of these – the vendor who hasn’t been prospected – is really a problem of agent neglect which can be turned around by action. The second two – vendors maniacal with greed or narcissistic in the extreme – are best avoided anyway. It’s these latter potential clients that Purplebricks will benefit from, and probably not to your detriment.
  • The UK real estate market is not the Australian real estate market. The UK has a ‘chain’ real estate system, which diminishes urgency and expectations for buyers and vendors. It’s best understood (in a nutshell, and very simplistically) as a chain of property settlements which must occur simultaneously. Every sale is conditional and held together by a chain of purchasers agreeing to go ahead with their transaction. If one buyer can’t settle for whatever reason, the whole chain of transactions fails. It’s unthinkable in comparison to the Australian real estate transaction process. Our own market has no such weakness: if you don’t perform on an unconditional contract, you’re toast. Australian expectations of real estate sales transactions are substantially higher than they are in the UK. Price quoting on property and expectations of price based on the quote also differ – in the UK, the asking price for the property is the asking price expected. Buyers know to offer below immediately. Our own market is the polar opposite – with buyers recognising that the asking price is often below vendor expectations. An Australian vendor left to their own devices to quote on property price a la Purplebricks will be completely stuffed, resulting in failed campaigns at a much higher rate than traditional agent-led campaigns. Moreover, capital cities in Australia have auction-centric markets. As any agent worth their business card knows, a successful auction campaign relies on conditioning and education of both the vendor and the buyer. It’s not a matter of whacking a price on the thing, uploading it to your favorite real estate portal and cracking open a tinnie. Purplebricks’ model appears to favour the private sale market which is more natural to the UK – it will probably work well in some more suburban areas of Australia which have limited capital growth and poor agent activity.
  • Fixed-price real estate marketing isn’t a new thing. Purplebricks has marketing and technology, and they’re utilising it at far more sophisticated levels than many of the dodgy fixed-price ‘Sell My Whatever’ brands of the past. But their model is essentially the same. Their offering will appeal to some of the market, certainly – variants on this offering always have. The best way to future-proof yourself against potential disruptors wearing different guises? Be a better agent. Use technology to your advantage. Prospect properly. Pay attention to details. Make people feel special. It’s a service industry, which is something the real estate community itself sometimes forgets. Our trade is our capacity to serve our community and negotiate relentlessly for our vendors.
  • Horses for courses. Not every vendor is driven by value. Some are driven by prestige: they want to list with the best agent who has the best marketing. They want the soft gloss, four page brochure. They want the VR floorplan. They want everything that opens and shuts, and they want their friends to see it. These people will not be attracted to PurplebricksOther vendors will kill you for a dollar and want to haggle down the price of a Happy Meal. This may be partly your failure for neglecting to show them why you deserve to be paid for your time and effort. But it might be because they frickin’ hate real estate agents. Or that they’re just really cheap, too. And that’s okay. Horse for courses. Purplebricks isn’t for everyone any more than you are.
  • Negotiators R Us. Purplebricks flat-price philosophy works when you don’t truly understand the ugliness of human nature. That vendors and buyers are greedy, vulnerable, scared and largely unable to negotiate effectively. They’re strung out and emotional: they’re three year olds at dinnertime, waving around a contract of sale. That’s why there’s estate agents to coach them through this risky, emotionally fraught process. Vendors don’t believe they’re unreasonable with their price expectations. The fact they’ve rewired the garage and put in new carpet has to add $12,526.00 exactly to the price they’ll get for the home, right? They don’t understand the dangers of pricing a property inappropriately, and the risk that overexposure in the market has upon a property’s eventual value. Purplebricks aren’t an estate agency: they’re a technology business offering systems and access to task-oriented agents. They’re not you, agent.

If anything, Purplebricks will improve the state of the Australian real estate market by encouraging existing agents to finesse their offering to the public. To go about things in a different way, using technology and old school service. It will make stragglers practising in markets too long neglected  by lazy, backwards Principals shape up or ship out. The only people who have anything to fear from Purplebricks are agents who are lacking in skills, ideas or talent. So don’t worry about the disruptors: just get on the with the job.

* I did contact three Purplebricks estate agents in Melbourne to learn more about their model. All three told me they were under strict instructions not to speak to the media about their experience as Purplebricks agents.

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The Bloodied Messenger: Property Managers and Public Respect

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The phone would ring three times – the receptionist having told me already that John from East Melbourne was on the line. He was a tenant in a property I’d been instructed to sell, and I hadn’t spoken to him before. As an estate agent, it was my role to inform him that yes, his rental property was going to be sold and that yes, we’d be doing our first open within two weeks. A veteran of these conversations, the response from my tenant went almost uniformly in one of three directions.

“No, I’m sorry I won’t let you in my property. I don’t have to.”

or

“I have concerns about security, so I need to be at every open. And I’m at home on Wednesday morning at 9:30 am or Sunday evening at 7:00 pm, so those are the only times I will allow you access.”

or

‘The landlord needs to offer me some compensation. Then we can talk.”

In every one of these instances, my first proposed open on a Saturday at a normal time when purchasers could attend went ahead. Principally because as the agent of the vendor I did have the right to enter the property given due notice to sell a home. The landlord doesn’t have to pay any inducement to legally access the home for the purpose of selling – but indeed they may agree to pay an inducement if the home is presented beautifully and with good will.

In retaliation for having done my job as an agent, I have been variously threatened with a knife by a caterwauling tenant in considerable distress, had to speak with police and sign a state dec confirming that I did not steal a computer that a tenant accused me of pilfering. I have had tenants stay in bed farting during open for inspections, leaving bucket bongs in the center of the living room. Prior to an auction, I had tenants involved in a little light latex bondage in their kitchen, seemingly surprised to see me (and thirty enthusiastic auction-goers) pouring in the front door. That was a real doozie, and I called that auction with relish.

Having worked in the real estate industry, I’m keenly aware of both the failings of the real estate industry itself and of the deep disregard for people who work in the industry. Did you know that – on average – every three years 80% of the real estate industry in Australian turns over? When you consider the vitriol aimed at those working in property – in particular, property managers – this should cause little wonder.

When I’m online and see people having conversations about the sheer gall of agents attempting to  having open homes in their leased property, I am often saddened. Our community see property managers as bottom-dwelling halfwits who are attempting to do the wrong thing by them at all times. If they’re tenants, they view PMs as inattentive, unfairly exacting in their standards or stalkerish when following up overdue rent. If they’re landlords, property managers are viewed as unavailable, ill-educated and on the tenant’s side.

Given the lack of community respect for what is effectively a vocation (because they sure as hell don’t do it for the money – particularly in property management), the rapid industry turnover makes sense. Property managers – on average – have a portfolio of 220 – 250 properties which they oversee. This means 500 relationships – those with tenants and landlords – and a mountain of maintenance orders, following up of rent arrears, negotiations between parties with the added frisson of occasional abuse. They are usually overworked and quite stressed out.

I’ve often seen online conversations from ostensibly lovely people decrying estate agents for daring to ask to have an open for inspection on a Saturday at their leased property. Cue a stream of replies about ‘leaving the dishes undone and the house dirty, that’ll teach ’em’ and ‘just don’t let them in, they can’t make you’, and I’m left angered. As a tenant, you are required to allow fair access to your property for the purpose of lease or sale once given notice. Just as the landlord must fix problems with a home once alerted to them, tenants must allow public access to their property at fair times for the purpose of re-leasing or selling. Being difficult and aggressive – by either making the agent fight with you to do what they are both instructed to do and legally allowed to do – isn’t a solution. It won’t make the problem go away. Leaving a home dirty and unpleasant isn’t helpful either – all it results in is more and more opens as it takes longer to lease or sell the property.

Undoubtedly, we need to make changes to property and investment laws in Australia. Annual rent increases, short leases and negative gearing all have a deleterious effect on the relationship and respect between landlords and tenants. The property manager or estate agent is the meat in the sandwich between these oft-warring parties. Instead of working out ways to stymie your 23-year-old property manager from making a fair repair to your investment property or making her feel unwelcome to do her job as legislation supports – think about petitioning to government bodies about the rights of tenants and landlords. We probably need longer lease terms, and longer periods between rent increases – it’s not fair to expect people to move home every year. But until those things are amended, the agents you deal with are following through on their roles in the best way they know how, trying to solve problems and make everyone happy.

And if one thing’s certain in this life: trying to make everyone happy makes no-one happy. So: don’t be cruel. Don’t bully and demean a profession for attempting to do their jobs well – remember, these are property managers are confronted by regular verbal abuse and rental properties sometimes destroyed and defaced by hostile tenants. Allow fair, tidy open for inspections without aggression or violence – they’ll be out of your hair as soon as they can. Equally, if you’re a landlord, make reparations on your property when you need to, and be understanding about what ‘fair wear and tear’ means.

Above all – don’t shoot the messenger.