Purplebricks, the UK-based property startup which hopes to disrupt the agency model by charging a low fixed fee for transactions which normally cost thousands, has secured a £7 million investment – or a 30% stake – from Neil Woodford, one of Britain’s highest profile fund managers. An additional £1m has also been raised in this round from existing angel investors alongside the UK VC DN Capital. Paul Pindar, former boss of outsourcing giant Capita, is among Purplebricks’ other backers.
Woodford’s investment comes from the £2.4bn Woodford Equity Income fund and is the biggest non-listed investment that the fund has made.
Purplebricks now plans to launch more widely across the UK after building a base in the South of England.
The company is the brainchild of brothers Michael and Kenny Bruce, who sold a large real estate agency business Burchell Edwards for an undisclosed sum to Connells, three years after the brothers bought it out of administration.
Purplebrick’s proposition is to offer an online estate agency model that allows people to oversee the sale of their property online rather than waiting for a realtor office to open.
Instead of maintaining a high street chain with expensive offices, Purplebricks uses a network of local brokers to handle transactions and be on-hand to assist sellers.
Purplebricks CEO Michael Bruce says “thousands of people” choose to use the service because of “the service from our local property experts.”
Customers selling their property can book a free valuation from one of these experts and for a fixed VAT inclusive fee of £599, the service includes the full listing you would normally get from an estate agent which is distributed to the major platforms of Rightmove, Zoopla and Prime Location. Landlords can also use the service for between £75 and £199 a month.
The average UK High Street estate agent’s commission is 1.8% or around £5,600 per house. But if you are selling a £500,000 property (which applies to many UK houses now), you could easily spend £10,000 plus VAT. And that is on top of solicitor’s fees, and all the expense of buying your next home, such as stamp duty.
In other words, this model is highly disruptive to the existing market.
Nenad Marovac, Managing Partner at DN Capital believes the company is “poised to disrupt the UK estate agency industry.”
But Purplebricks is not the only dog in this flat-fee race.
HouseNetwork offers a basic house-sales package for £395 to £495. SellMyHome offers sales packages ranging from £499 to £699. Tepilo charges a basic £195, plus another £99 if you want professional photographs, £40 for a floorplan, £75 for an online tour, £50 for a For Sale board.
So while well-funded, Purplebricks is not alone it does not yet have a Beeny. But it does have cash to spend.
David Hart of Teplio told me the firm was “growing steadily” and was profitable from about 3 months after they started the Online Estate Agency model this time last year.
For my money this activity would suggest a roll-up of these companies is probably in the offing.