Online estate agent Purplebricks has been told it by the Advertising Standard Authority (ASA) that certain claims on its website were misleading and must not be repeated.
Its website, seen in July 2016, featured nine testimonials from consumers including claims of how much they had saved in fees by using Purplebricks. The first three testimonials stated “Mrs Kay, Blackburn, March 2016. Fees saved £5,682”; “Mrs Roach, Bournemouth, March 2016. Fees saved £3,702”; and “Mr Penfold, Edington, March 2016. Fees saved £7,302”.
Arun Estate Agencies Ltd challenged whether the “Fees saved” claims were misleading and could be substantiated.
Purple Bricks Company Ltd (trading as Purplebricks) provided information from their records which showed the sale prices achieved by the individuals featured in the first three testimonials. They confirmed that, based on an assumed estate agent fee of 1.8% of the sold price of a property, compared to the £798 fee Purplebricks charged in 2016 to property sellers outside London (or £1,158 in London and the surrounding area), Mr Penfold would have saved the amount stated in the ad, and Mrs Kay and Mrs Roach would both have saved slightly more than was stated in the ad.
In relation to the use of the assumed estate agent fee of 1.8%, Purplebricks said that very few estate agents stated up-front the rate of commission they charged; they had tried to find out other estate agents’ commission rates but were almost always told that it would not be revealed until after a valuation had taken place. They said that agents charged different clients different commission rates, and that some estate agents operated on a hyper-local basis. They therefore believed it would be very difficult to find out the fees charged by estate agents in different areas of the country. They also said that most property sellers would get a valuation and a quote for fees from three estate agents before choosing which agent to sell through. For those reasons, they had based their assumed estate agent fee on the results of a customer survey they had conducted.
They said the survey, which was sent to all individuals who had sold properties through Purplebricks between 19 May 2015 and 7 July 2016, asked respondents to “select the level of commission you were quoted if you had your property valued by a traditional high street estate agent”. Out of 2,308 respondents, 1,805 had indicated the level of commission they were quoted. Purplebricks calculated the average commission quoted as 1.5% for both the 81 respondents in London and the surrounding area (defined as the London postcodes N, SE, SW, EC, E, WC, W and the areas of Twickenham, St Albans, Watford, Ilford, Hemel Hempstead, Enfield, Sutton, Luton and Bromley), and to the 1,724 respondents outside London,.
Purplebricks said their calculations were based on the assumption that the commission rates referenced by respondents would exclude VAT. They said it was the standard convention among high street estate agencies to quote VAT-exclusive prices, so they believed it was likely that the quotes respondents had received for commission rates would not have included VAT.
Purplebricks said the findings of their survey were supported by evidence from independent parties. They highlighted that the Citizens Advice website stated that estate agent commissions were “usually between 1½ – 2½ %”, and that an article on YourMoney.com stated that the “average high street fee is 1.5% … but charges can be as much as 3%”. They also referenced a 2011 Which? survey and information from a national conveyancing firm which they had referenced during the course of a previous ASA investigation.
Purplebricks said the reference in the survey to “traditional high street estate agents” would be understood by consumers to cover all estate agencies with a high street office, excluding online or “hybrid” estate agencies without high street offices. They explained that the service they offered for their fixed fees included the same services offered by traditional high street estate agencies, although their services were available outside of estate agents’ usual hours of operation.
Purplebricks believed their advertising was not misleading but said that for the avoidance of doubt they had made some amendments to the web page.
With regard to the “Fees saved” claims in particular, the ASA considered consumers would understand the claims to relate to savings the individuals had made on the cost of estate agent fees by selling their property through Purplebricks, compared to the amount they would have been charged by other estate agents. Given that the testimonials related to properties sold in specific areas the ASA considered that consumers would expect that the comparison between Purplebricks’ fees and those of estate agents would relate to the fees of estate agents in those specific areas.
The ad watchdog was concerned that the evidence provided by Purplebricks was not adequate to support the basis of the “Fees saved” comparison in the ad.
The ASA noted Purplebricks’ explanation that the comparison was against the fees charged by “traditional high street estate agents”. While the ASA considered consumers would understand that the comparison was made against fees charged by other estate agents, it considered it was not clear from the ad that the comparison was being made specifically against ‘high street’ estate agents.
In the absence of information in the ad about the basis for the savings claims, including the type of estate agents against which the “Fees Saved” comparison was being made, the differences between the services offered by Purplebricks and the comparator estate agents, and because the evidence was not adequate to support an assumed comparator fee of 1.8% of the sold price of a property, the ASA concluded the “Fees Saved” claims in the ad were misleading to consumers and had not been substantiated.
The ad breached CAP Code (Edition 12) rules 3.1 (Misleading advertising), 3.7 (Substantiation) and 3.33 (Comparisons with identifiable competitors).
The firm was told that the ad must not appear again in the form complained about. Purple Bricks Company was told to ensure that ads which made comparisons provided sufficient information about the services being compared to ensure that consumers would not be misled about either the advertised service or the competing service.
The ASA also told them to ensure they held adequate evidence to substantiate the basis of comparative claims.