Meet the man trying to rebuild Purplebricks from the ground up
Each week Charlie Conchie interviews the figures across the world of finance and tech. This week he sits down with Sam Mitchell, who took over collapsed digital estate agency Purplebricks for £1 last year.
Sam Mitchell is quick to give a view on why he was able to snap up Purplebricks for £1 last year.
After launching in 2014 with the goal of shaking-up the bricks-and-mortar market, Purplebricks managed to squeeze in listing in London, expansion into the US, Canada and Australia and hit a value of £1.3bn at its peak.
A few years later, Mitchell’s firm Strike was the lone bidder to rescue it from extinction. Why did the business ultimately fail? Well, he says they just didn’t understand how to sell houses.
“I don’t know how with a straight face you phone someone up after 10 months and say ‘I haven’t sold your house. You owe me £2000’. That’s just poison for your customers,” Mitchell tells City PM
For all its challenger dressing, he claims Purplebricks fundamentally lacked someone who knew how the market worked. Now lifelong property man Mitchell, whose career was forged at Foxton in the “fun days of the early 2000s”, is the man trying to rebuild the firm.
Four letter words
Despite a career bouncing around some of the most recognisable names in the estate agency industry, Mitchell remains alive to the popular perception of it.
His previous firm Strike, backed by the Carphone Warehouse and TalkTalk tycoon Sir Charles Dunstone, was already looking to shake some of the cultural baggage off by dangling an online ‘sell for free’ package to prospective sellers.
It was a similar idea to Purplebricks, which promised to save thousands of pounds typically shelled out on agents.
“I can’t think of another [industry] where you would sell or buy something at £500,000 and the process has been run by people who most people don’t like or trust,” Mitchell adds. “And you have to spend, on average, probably £4-5000 pounds on fees for advice that you don’t like or trust.”
Even with the flaws in its business model, he says Purplebricks was onto something. The firm had reined in the role of the unpopular middlemen, stripped out commissions and looked to drag estate agencies into the 21st century.
That pitch initially won round investors too when it launched in 2014, bagging the firm a £240m price tag as it floated on the junior AIM market just a year after launching. It wasn’t long before the founders,brothers Michael and Kenny Bruce,were plotting global domination.
The model wobbled as the firm grew, however. With its quirky fee structure, some analysts say the firm was incentivised to just win new listings rather than actually sell the houses.
Anthony Codling, a former analyst at Jefferies who covered Purplebricks, said the firm “only sold about one in two houses” under its previous ownership.
Mitchell’s plans are now markedly more muted. He talks in English regions rather than continents and is looking to play into where the brand already has some currency.
“We bought the business in June last year, we relaunched on Boxing Day, and it’s been an incredible response – we’ve put a very small TV campaign together through the North and Midlands, which catapulted us back up to being the biggest agent in the entire country,” he says.
Central to its revival has been a free service that strips out fees entirely with the optional addition of extra costs – a far cry from the hefty £2000 fee Purplebricks slapped on the seller after a few weeks in the event the property didn’t sell.
Outside the City
Since scooping up the firm last year he’s been pushing ahead with a turnaround. Around 10 per cent of jobs were cut and the organisation restructured with a beefed up financial services arm that is training mortgage brokers.
Despite its travails, Mitchell is betting that the brand has not soured in the eyes of the public. While City types may have been watching a business crumble from a value north of a billion to a solitary pound, he says the average seller knows it as the estate agent trying to do something a bit differently.
“You and I are in the business press all the time. We’re very close to what’s happening with transactions and what investors are doing and how people feel about the business entity. The general public aren’t, frankly,” he says.
“If you ask the general public on the street what they thought about Purplebricks, they’d say I’m aware of it as an estate agent doing something different and charging less for it.”
Mortgage market woes
Weighing on the rebuilding effort however has also been the issue of stubborn inflation and lofty interest rates. Mortgage rates remained sky-high at the end of 2023 and have kept the market subdued, and house prices nationally remain around eight times the average salary.
However, he reckons things are looking up for the year ahead. Banks have begun scaling back mortgage rates and new data from the Office for National Statistics found that house prices decreased by 1.4 per cent in the 12 months to December 2023, setting the stage for a potential release of demand this year.
“It was a recipe for a horrible, horrible, horrible property market [in 2023]. However, since September, the Bank of England have held rates, we’ve started to see in the last two or three months banks competing on rates, which we’ve not seen for some time, and actually from December onwards the market’s been pretty good,” he says.
Mitchell is already plotting the next move into an English region. London is calling and Purplebricks is readying a major marketing push to try and dispel any memory of the collapsed lender slapping people with £2000 no-sale fees.
He says he’ll know they’re back on the path when “people are raving about us at the school gates”.
“That takes some time.”