Anyone who has tried to buy another house before selling theirs knows that it’s a pain. Traditional real estate transactions force homeowner-buyers in this situation to gamble lining up the closing dates or risk being without a home or juggling two mortgages at once. In response, online real estate companies like Knock have leveraged tech to challenge this model.
Knock real estate was founded in 2015 with the mission to “empower people to move freely.” Since then, they have rolled out a Home Swap service to help streamline the dual transactions of buying and selling a home at the same time, as well as other services aimed at just buyers or sellers. While these services can be a viable option, they come with a higher price tag than traditional real estate and some of Knock’s other competitors.
Knock is an online lender simplifying the way homebuyers finance their home purchase while selling their old one. Traditionally, homeowners would have to sell their old home before qualifying for a mortgage on a new home due to debt-to-income ratios. But Knock helps homeowners circumvent this by underwriting the purchase of the new home, backed by Knock’s guaranteed offer to purchase the old home.
After homebuyers are moved into their new house, Knock helps them sell their old one. That means homeowners don’t have to worry about juggling two mortgages or moving twice.
How does Knock compare to the way things are usually done?
Knock, like many of its competitors, offers several programs designed to address the sticking points of traditional real estate. Among them are buying a house while selling one at the same time, making financed offers as competitive as cash offers, and helping homeowners access equity in their home. Here’s how they do it:
This program helps homeowners buy and sell a house at the same time. Homeowners start by getting pre-qualified for a home loan, after which time they receive funds to make a non-contingent offer on their new home. Once they close and move into their new home, Knock will cover up to $25,000 in repairs to their old home before listing on the open market.
If the home doesn’t sell within six months, sellers have the option to accept Knock’s backup offer, typically 80% to 85% of the market value of the home. Once the home sells, sellers pay back their equity and listing prep advance to Knock with interest.
For homebuyers who only want to buy, the Knock GO (or Guaranteed Offer) can help. This program helps transform a financed offer into a cash offer, free of financing and appraisal contingencies. This is especially helpful for buyers in competitive markets, who are bidding against investors and other cash-rich buyers.
Buyers interested in this option can start by applying for a mortgage directly from Knock.
Homeowners who aren’t ready to move but want to access the equity in their home, can sell their home to Knock but continue to live in it through a sale-leaseback agreement. Through this agreement, sellers stay in their home and pay their buyer rent for the duration of their agreement. This can be a good option for homeowners who are burdened by their mortgage payments and have significant equity built in their property.
Knock is not free. Like other lenders, they charge interest and service fees on the loans they extend. The actual pay structure will depend on which Knock product borrowers use. Their fees are outlined below:
This is the most expensive Knock service. Borrowers utilizing the Home Swap program will have to pay a 1.25% convenience fee, a $1,450 administrative loan fee, and a mortgage payment reimbursement fee, on top of the costs of traditional real estate like agent commissions and other closing costs. This can amount to anywhere from 8% to 16% of the sale price of a home, as compared to
This Knock service doesn’t charge a service fee like the other products offered by the online lender. Instead, borrowers pay a $1,450 administrative loan fee. Typically, this is lower than a traditional loan origination fee (which ranges from 0.5% to 1% of the total loan amount), but unlike an origination fee, Knock’s administration fee is non-negotiable.
With Knock’s nest program, you’ll make money on the sale of your house, but that doesn’t mean that it’s free. As with any home sale, you’ll be on the hook for seller’s closing costs — typically 8% to 10% of the purchase price of the home — but these may be negotiable. The real cost here is that instead of building home equity with your monthly mortgage payment, you’ll continue to pay Knock rent in order to stay in your home. Knock charges market rent, which means that the price can fluctuate depending on market conditions.
Knock is a legitimate online lender with good reviews — 4.3 out of five stars on Trustpilot and a B+ rating from the Better Business Bureau. Whether or not Knock is a good idea will depend on the individual needs of the homebuyer or seller and their chosen services.
Knock’s Nest service can be a good option for those who are struggling with their current mortgage payments and need to unlock the equity in their home to put towards other expenses. Knock’s Guaranteed Offer and Home Swap services are also viable options but they come with a higher price tag than competitors.
Knock’s home swap program is where customers have the most friction with the company. This is apparent in online reviews of the service, where home swap users report frustrations with Knock’s lack of transparency around service fees and loan underwriting practices. Several reviews on Trustpilot and Better Business Bureau cite Knock’s disorganization as the cause of losing their bid on a home and the loss of earnest money deposits.
However, the overwhelming majority of reviews for the company are positive and Knock is responsive to negative reviews in online forums. Of all the complaints reviewed at the time of writing this article, each had a response from the company.
Knock may not be right for you, but that doesn’t mean that you need to resort to traditional real estate. There are a number of alternatives that offer similar services to Knock, like those detailed below:
If you’re looking to buy and sell a house at the same time, Orchard is a great alternative to Knock. Our Move First service helps you move into your new home before selling your current one, so you can skip the showings and only move once — which could mean savings over $1,800 in listing prep and $5,000 in moving costs.
So how does Orchard work? After you let us know a little more about your home and your goals, we start by giving you a Guaranteed Offer on the sale of your current home, and an Equity Advance for the purchase of your new one. Then, we pair you with one of our experienced agents local to your market who will help you find your dream home and make a non-contingent offer with your Equity Advance.
Once you’re all moved into your new home, we’ll help you prepare your old home for sale — including completing repairs and renovations at no upfront cost to you — and sell your home on the market for top dollar. The best part? If it doesn’t sell in 120 days, we’ll buy it from you.
Interested in learning more? Get started with a free home valuation today — our estimates are 30% more accurate.
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