Last week, I discussed ‘Purple Bricks’ and described the controversy surrounding this U.K based company

that has entered the Australian real estate sales market within the past 18 months.

As we mentioned last week, the company purports to sell your home for a flat fee of $4500 including GST and marketing although acknowledges that it is the seller themselves that is doing a majority of the work in selling their own home for this basic cost.

There are options available (at an additional cost) for those that would like more involvement from an agent.

So how does this company manage to sell your home for such a discount price?

Over the past decade, many discount models have struggled to make a profit over the past decade on the Australian real estate sales landscape.

Whilst on the surface, it may seem like selling real estate is nothing more than driving European cars and going home to bathe in $100 notes, I can tell you that real estate sales related businesses are not dissimilar to other businesses…they operate on a profit margin of around 15-20% (if they are going well).

Over the past few years, the costs of running a real estate company (such as insurances, rent, subscriptions to real estate portals (and other associated websites such as data suppliers, customer management software programs), marketing costs, wages, petrol etc. have increased significantly.

Coupled with the fact that the average real estate commission has decreased due to competitiveness in the marketplace, I can assure you that the margins are tighter than ever right now.

Many real estate sales businesses pay their sales staff anywhere from 35-70% of the commission (depending on their structure and how many sales the agent will make).

In Australia, the average real estate sales person makes around 9 sales per year and earns an income of approximately $50,000. They also work an average of 55 hours per week.

Each individual agent (even if they don’t own the business) needs to look at themselves as a business as they still have costs of phone, petrol, marketing costs, personal assistants etc and likewise, a 20% “profit” after paying all expenses would be a reasonably successful agent.

‘Purple Bricks’ are right now advertising for salespeople to join their team.

From what I have been told, the agent receives $1100 of the $4500 fee that ‘Purple Bricks’ generates through a signup. (As mentioned last week, I cannot call it $1100 for a ‘sale’ because this fee is charged to the consumer irrespective of whether or not the property actually sells).

From viewing the ‘Purple Bricks’ website, it appears that representations are made that an anticipated income for a salesperson would be “$200K+”.

I must say that I find this figure a little hard to believe.

From the figures I have at hand, the agent that makes the most number of sales in Queensland generates approximately 160 sales per year and lists (I believe) around 175 properties per year.

To make $200,000 per year under this model, you’ll need to sign up approximately 182 properties – a number that if successful, would mean that you’re listing more properties in Queensland than any other agent…especially given you’re likely to be assigned a designated territory and can’t move outside of this area.

Now here’s the real truth…any successful agent would know that it is very, very hard to make a living out of a payment of $1100 by the time you’ve paid for the general expenses of running a business (or at least the business of operating as a salesperson).

You’d certainly have to list at least 100 properties to make it worthwhile and I can tell you from experience in listing this amount of properties in a year, you would need a team of at least 3 people (bare minimum) to manage this number of properties effectively and have any chance of maintaining an excellent standard of service and results.

Next week, I’ll share the honest statistics of how ‘Purple Bricks’ agents have performed since their introduction into the marketplace and how they have performed on our ‘mystery shop’.

Until then, as always, Happy Listing & Happy Selling!