Faced with a mounting backlog of unsold properties and pressure from angry vendors, PurpleBricks Australia has been offering cash prizes to agents in New South Wales who convince the most vendors to reduce their asking prices.

Neil Tavender

PurpleBricks COO Neil Tavender

In a competition the company dubbed the “NSW Raffle,” agents were required to secure a minimum price reduction of 5 percent on three properties to be eligible for a $5,000 prize, The Australian Financial Review reports.

President of the Real Estate Institute of New South Wales Leanne Pilkington (LinkedIn profilecalled the competition “outrageous” and said she was “horrified and speechless” upon hearing the revelations.

“I’ll be having conversations with the NSW Office of Fair Trading” — the consumer watchdog that administers the legislation governing real estate in that state — “and seeing how this sits with them,” she told the Fin Review.

“Estate agents are paid to act in their clients’ best interests by law. How can this be in their best interests?”

But PurpleBricks’ chief operating officer Neil Tavender (LinkedIn profile) defended the company’s practices as “entirely normal” and said many agencies incentivize staff to achieve “realistic sale prices.”

“At PurpleBricks, we constantly assess market conditions and continually review every house on its merits. The seller is involved and engaged in these conversations and ultimately it is their decision,” he said.

Details of the competition, leaked by multiple sources, revealed that some vendors agreed to reduce their asking prices by as much as 20 percent.

One vendor in Sydney’s south-west cut their asking price from $1.2 million to $1 million AUD after just eight days on the market, while another reduced their asking price to $1.2 million from $1.4 million after 18 days on the market.

Since the report was first published, a number of vendors have come forward to describe how they were pressured to reduce their asking prices. One NSW vendor is reportedly pursuing a class action against the hybrid agency. “We were pressured pretty quickly to reduce our price,” they said. “It was a really bad experience.”

According to a former PurpleBricks agent, the competition was intended to help the hybrid agency clear excess stock ahead of a visit by co-founder Kenny Bruce (LinkedIn profile), however, the company didn’t end up paying out any money.

These revelations, in addition to its high turnover of agents and recently restructured business model, reveal how deeply the hybrid agency misunderstood the Australian real estate market when it expanded to the country in 2016.

The company has already been fined by consumer watchdogs in two different states, while a third is currently investigating the agency’s business practices.

TThe agency recently raised its fees — to almost double what they were when the service first launched in Australia two years ago — under a new business model that will see vendors pay half the fee up front, with the remainder due once the property is sold.

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