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Purplebricks ran competition to pressure vendors to cut prices

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Agents working for fixed-fee operator Purplebricks pressured vendors to cut their asking prices by as much as 20 per cent as part of a NSW "competition" which offered cash prizes for agents who secured the most price reductions.

Called the "NSW Raffle" agents had to secure a minimum 5 per cent reduction on three properties to go into the raffle which offered a $5000 prize "generously supported by [Purplebricks co-founder] Kenny Bruce".

Any further reduced properties secured the agent another ticket as did a customer upgrading their marketing to the more expensive premier package on realestate.com.au.

Purplebricks agents had to secure a minimum 5 per cent reduction on three properties to go into the raffle which offered a $5000 prize. 

"This is an awesome opportunity to get our customers homes realigned with the market place and make sure we get the job done for them," said an email sent out to staff. The email, seen by the The Australian Financial Review, said that agents with stock that had been on the market for more than 30 days "needed to realign pricing the most".

Accompanying the competition, was a spreadsheet called the "NSW raffle card" which tracked how agents were faring. It was leaked to the Financial Review by multiple sources and makes for astonishing reading.

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In one instance, a vendor in Panania in south west Sydney agreed to cut their price from $1.2 million to $1 million in the space of just eight days, a 20 per cent reduction, while another in Condell Park cut their price from $1.4 million to $1.2 million, a reduction of 17 per cent in 18 days.

In total, more than 100 vendors cut their asking prices – 28 by more than 10 per cent – as the company battled an increasing number of unsold homes and angry vendors who paid between $5500 and $7000 upfront to secure their services.

Former Purplebricks territory owner Jason Quinn told the paper: "We were told that they wanted to clear residual stock ahead of Kenny Bruce coming here and bringing in a new way of working.

"To be in the competition, you had to get your vendor to reduce their asking price by 5 per cent or more. The agent with the most reductions won. However, they didn't pay out any money at the end," he said.

Purplebricks Australia had threatened to seek a court injunction to prevent the Financial Review publishing the details of the vendor-discounting competition.

Later, Neil Tavender, Purplebricks Global COO defended its business practices saying it was "entirely normal for any professional real estate agency to incentivise and reward their people to achieve realistic sale prices in a fast moving and ever-changing real estate market".

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"At Purplebricks, we constantly assess market conditions and continuously review every house on its merits. The seller is involved and engaged in these conversations and ultimately it is their decision.

"More broadly, what's clear is that we have a small group of disgruntled former agents looking to sensationalise and paint the company in a negative light at any opportunity."

Purplebricks announced this week it would lift its fixed fee to $8800 with half paid upfront and the rest on settlement with agents, who pay just over $1000 per listing currently given the opportunity to double their earnings if they secure a sale as well.

Its strategy in NSW to incentivise agents to pressure vendors to cut their prices – rather than work to get them the highest price for their home – will likely attract further scrutiny from state consumer watchdogs, who are already examining the activities of Purplebricks.

Among the requirements of the NSW Property, Stock and Business Agents Act 2002 (the Act) and the Property, Stock and Business Agents Regulation 2014 (the Regulation) is that an agent "must act in the client's best interests always, unless it would be contrary to the Act, the Regulation or otherwise unlawful to do so".

A spokeswoman for NSW Fair Trading Fair Trading said it was not currently investigating Purplebricks. "Fair Trading is working with Purplebricks to ensure it is compliant with State and Federal legislation."

News of the NSW competition will add fuel to the argument of Purplebricks' detractors – mainly traditional commission agents – who claim the UK operator does not offer a full service to its customers.

larry.schlesinger@fairfaxmedia.com.au

Larry Schlesinger writes on real estate, specialising in commercial and residential property. Larry is based in our Melbourne newsroom. Connect with Larry on Twitter. Email Larry at larry.schlesinger@afr.com

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