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Purplebricks - might be built on poor foundations?

Purplebricks - might be built on poor foundations?
Online agencies such as Purplebricks have been spending heavily on TV advertising and a mass awareness campaign in an effort to grow their awareness however an investment consultancy company has issued a note to investors, advising them not to buy shares in Purplebricks.

Jefferies . the firm which advised Zoopla on its flotation . says 'whether people buy or sell homes through Purplebricks, we don't recommend that they buy shares in the company'.  The note is quoted as saying "The numbers in the business model look very attractive, however it is our view they don't add up". The investment firm says Purplebricks model favours 'listings over sales' and that costs will need to increase for the agency to increase its number of sales.

Basically Purplebricks get no reward for actually selling a house and is focused purely on taking on properties. The investment company has reported that its analysis shows that it takes Purplebricks closer to five months to actually complete a sale on average, around ten times longer than it takes to find a buyer.

Less than 5% of all property sales in 2015 were via an online agency, so the vast majority of sellers still feel that the traditional high street agent is the way to go. Selling houses is about dealing with people face to face and once the sale is agreed it needs a careful experienced hand to make the sale agreed proceeds to a sale completed. Online agents just don't offer this. It doesn't sound like purple is the colour of the future!