Originally Posted by PATRICK KEARNS | INMAN NEWS
July 16, 2020
Knock, a well-funded real estate technology company, announced Thursday the launch of a Knock Home Swap, a reimagined version of the company’s platform that serves consumers looking to buy and sell a home at the same time. The company is moving into mortgage, bridge loan and concierge services while shifting to a model where it partners with real estate agents instead of going direct-to-consumer.
“We’ve always had the plan to make this one integrated solution for people buying and selling at the same time,” Sean Black, the CEO and co-founder of Knock, as well as a founding team member of Trulia, told Inman.
Knock’s Home Swap platform includes a fully integrated mortgage, at what the company says is a competitive rate. The financing is non-contingent, which Black says will allow consumers to save on home purchases, bringing what is essentially a cash offer to the table.
The company also offers a bridge loan solution to help cover the down payment on the new home, as well as the initial mortgage payments, while Knock preps the old home for market. The bridge loan comes interest-free for consumers.
Knock, according to Black, makes most of its profit as a lender, the same way any other lender would on the back end. Knock owns an integrated title company as well. The company charges consumers a 1.25 percent convenience fee on the new home.
“Agents get to keep their commission and the brokers they work for [get their money]. We make money as a lender and as a title company and that’s it,” Black said.
In preparing the home for market, Knock gives consumers access to its approved contractor network to make sure the home gets the best price on the market. The company manages the work itself and will do work up to $25,000.
“We make sure the work gets done on time and we pay the contractor out,” Black said. “In that way, it’s pretty integrated.”
“The agent kind of controls it, the consumer says okay it’s done to my satisfaction and then we pay the bill so there’s accountability and transparency across it.”
Knock, which calls itself a transaction market place, at one time more closely resembled a backward iBuyer, helping homeowners buy with an all-cash offer. The company would buy a home with all-cash for consumers, then the consumer would buy that home from Knock, creating a double transaction. The pivot eliminates the need for two transactions and the accompanying friction and costs association, according to Black.
“By basically removing that and doing the lending piece, we can remove that friction and they can not only get the home right away in their name, but they can build equity in that home,” Black said.
The company isn’t buying homes anymore — which essentially created fake liquidity, according to Black — but it will still give homeowners the guarantee of buying their home if it doesn’t sell after six months. The company said 90 percent of Knock homes sell in 90 days or less.
Knock was a direct-to-consumer company during its nascent years, Black explained, so the company could understand which aspects of the user experience could be better improved and automated. In that time, the company has amassed nearly 700 five-star reviews on Zillow, which was a point of pride for Black.
But now, the company will no longer even market to consumers. In fact, consumers that reach out to Knock directly will be re-directed to an agent.
“We do have customers coming to us now, but increasingly we’re going to send them back to the agent network,” Black said. “We don’t have any thoughts of charging [agents] a referral fee because that’s not our business model. We just want to make sure that we give the customer the best person locally that can handle it.”
The new agent and brokerage partnerships will allow a lot more users onto the platform and a lot different types of consumers to access Knock’s services, according to Black. The company is launching initially with 10 broker partners, including Atlanta Communities Real Estate Brokerage, JP & Associates Realtors in Dallas-Fort Worth and Berkshire Hathaway HomeServices Arizona.
“By partnering with Knock we are able to eliminate so many of the pain points homeowners face when it comes to buying and selling,” Mark Johnson, CEO of JP & Associates Realtors said, in a statement. “They can make a strong non-contingent offer, move on their schedule, and don’t have to deal with repairs or showings. We’re thrilled to bring this service to Dallas.”
The change in the company’s product offering wasn’t a response to the pandemic — the transition began at the end of last year — but Black believes it’s the perfect solution for the current climate.
“Customers now more than ever want to get into a better house and they don’t want to do it with people crawling through their space, so it just worked out,” Black said.
Knock’s revamped service is live in Atlanta, Dallas-Fort Worth and Phoenix, with at least eight more markets expected this year. The company expects to be live in 21 markets by the end of 2021.