Startup Knock gets out of real estate brokerage, shifts into lending
Startup Knock announced Thursday it is getting out of the real estate brokerage business and becoming a lender.
This morning, the company unveiled a major shift in strategy with its new Home Swap program, under which Knock serves as the lender to help a homeowner buy a new home before selling their old house. It previously worked with lending partners but is now a licensed lender itself.
In other words, the company now offers integrated financing – the mortgage and an interest-free bridge loan – with the goal of helping consumers make strong non-contingent offers on a new home before repairing and listing their old home for sale on the open market.
With this new move, Knock has eliminated its Home Trade In program, where it helped consumers buy before selling by using its own money to purchase the new home on behalf of the consumer before prepping and listing the consumer’s old house on the open market. Under thatTrade-In model, the homeowner used the proceeds from selling their old home to buy the new home from Knock and pay the company back for anyrepairs it did to prep the house for sale.
Earlier today, we covered the news that another startup in the real estate space had also expanded into lending: Orchard (formerly Perch). With more than $600 million raised in debt and equity, Knock is one of the more well-funded players in the space.
The move represents Knock’s first foray into lending. As part of the new Home Swap program, homeowners have access to capital for home repairs, which the company manages through its concierge service, and they work with a local agent.
Knock co-founder and CEO Sean Black (who also co-founded Trulia) described its new Home Swap program as a “reimagined version” of its Trade In offering.
In a phone interview this afternoon, Black told HousingWire that the company decided to move away from its trade in program in part because it was capital intensive and required the closing of a house to take place twice.
“It added friction to the experience,” he said. “And now, especially during COVID, it can be inconvenient to try and sell a house at the same time as buying one. This is about making something possible that isn’t possible with any other traditional lender. We’re able to lend some money before an owner’s [old] house is even listed on the market.”
The new program is offered exclusively through agents who have been trained as a Knock Certified Agent. Consumers get the financing directly through Knock, and can immediately take ownership of their new home without having to worry about getting their old home prepped for sale, Knock says.
As mentioned above, the Knock Home Swap includes a fully integrated and competitive mortgage. It also includes an interest-free bridge loan to cover the down payment on the new home as well as mortgage payments and up to $25,000 for home prep and repairs on the old house.
As part of its Home Prep Concierge, Knock provides access to its approved contractor network and manages the payment of all bills upon completion of work. Knock also provides a backup offer on the old house in the unlikely event that it doesn’t sell within six months.
Effective immediately, consumers can work with a Knock Certified Agent at Atlanta Communities Real Estate Brokerage, JP & Associates Realtors in Dallas-Fort Worth and Berkshire Hathaway HomeServices Arizona Properties to leverage the Knock Home Swap to purchase their dream home before prepping and selling their old house for the best price on the open market.
With these partnerships, Knock says it will no longer market directly to consumers – a move that it says underscores its commitment “to partner with the industry and the value a local agent brings throughout a real estate transaction.” Knock plans to expand the program to 11 markets by year’s end and operate in at least 21 markets by the end of 2021.
“In today’s low-inventory environment and era of social distancing, consumers continue to welcome innovative ways to buy and sell their homes,” said Mark Stark, CEO of Berkshire Hathaway HomeServices Arizona Properties, in a written statement. “In the midst of a global pandemic, Knock created a platform that allows the real estate sales executive to provide more certainty and more buying power when selling and buying a home at the same time. We are excited to be able to offer this unique solution to our clients.”
Knock is headquartered in New York and San Francisco and currently operates in Atlanta, Charlotte, Raleigh-Durham, Dallas, Fort Worth and Phoenix. The startup was formed in 2015 by Trulia founding team members Black and Jamie Glenn.
The company has said that it does not describe itself as an iBuyer. For example, it used its own cash to buy the new home but said it did not profit from the repair work on a consumer’s old home.
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