Knock Knock, Who’s there? iBuyer. iBuyer who? iBuyer your house for cash.
This is the second in a series of articles about iBuyers. IBuyers are the latest iteration of change in the Atlanta real estate market and use technology as an alternative way of selling your home. Atlanta is ground zero in war among iBuyer Brokers: Knock, Opendoor and Offerpad. This article is part of our iBuyer series:
Knock has been operating in Atlanta since 2016 and considers Atlanta it’s home turf. The company announced a new trade-in program in January in a bid to streamline the “trade in” market for homeowners who want to simultaneously sell their existing home and buy a new one.
In a seller’s market it is challenging for home sellers to move. Not because they can’t sell their existing home- that is a no-brainer. The challenge is simultaneously selling their home and finding a new home to buy. Inventory of homes for sale is low. You might sell your home and have no place to go.
Well-heeled homeowners just address the problem by buying a new home before they sell. No gaps in places to live. Folks with good credit can get a “bridge loan” that will help them simultaneously own two homes at one time. Regular folks have to put their home on the market and then pray a home that fits their needs will be available when they sell their existing home.
Knock has stepped in with a solution for the “regular folks”. Inman News gives a report of how the Knock model works
Here’s how Knock’s home trade-in model works: You find the home you want to buy, then Knock buys it first, all-cash. It then makes repairs or improvements (the cost of which Knock says will be rolled into your mortgage). Knock also says it will get you a guaranteed pre-approval to qualify for a mortgage on your new home. Then, Knock gets your old house ready to sell — including handling all repair work and associated costs — and puts it on the market.
Even before Knock lists your old home, it says you can move into your new one. Once your old home sells, Knock charges you a 3 percent commission
Knock is a kind of brokerage and a house flipper, but its new trade-in model attempts to offer convenience, simplicity and reassurance to those looking to move.
Customers don’t have to worry about whether the timing between their closings will work out, how to get equity out of their home to buy a new one, whether they’ll have to move into a new home before repairs are done, or whether they’ll be able to move in with enough time before their kids have to start in a new school district.
Previously Knock had a listing model where they agreed to list your home and then buy it at a guaranteed price if they could not sell it. As Atlanta TV and Radio consumers know Mark Spain has been touting this program for years. He has also stated that he never had to buy a home. Being a real estate agent I can only assume that Mark Spain’s guaranteed purchase price is not all that attractive.
So how does the Knock purchase price stack up? Given the amount of advertising dollars Knock is pouring into the market, one has to assume the model will get a thorough testing this spring. Knock investors are not the patient type and any misstep in the business model is going to be quickly addressed.
There are home sellers who need the certainty of this type transaction. In the past investors with cash offers have filled the need. What does the future hold for Knock.? In an Inman News article Knock stated it had “helped over 2,000 consumers” in the Atlanta area so far.
Knock Knock. Whose there? An iBuyer with money in hand.
By Tim English, Marketing Manager and Realtor, Sally English and the English. Tim has been active in the Atlanta residential real estate marketplace since 1982 as a developer, builder, investor and Realtor. He holds an MBA with concentrations in Finance and Real Estate from Columbia University and a BE in Chemical Engineering from Vanderbilt University. Tim and Sally are married and have three adult children. They live in Northeast Atlanta in a neighborhood convenient to Emory, CDC and CHOA.
ADDENDUM from Feb 24, 2018
Found this exchange on facebook between a potential Knock customer and a knock representative
Potential Customer: ” Here is the deal they charge a lot of fees and take off for every little thing but if you want to sell fast its perfect. They only give you fair market value not whats comparable to what homes comps sell for in your neighborhood area”
Knock: “Just to clarify how our trade-in works…we do NOT buy your old house, we buy your new one and then sell your old one. First, we help you find your new house on the market, make an all-cash offer and buy it (usually at a 5%+ discount) on your behalf using OUR CASH. We then list your old house after you have moved out, so you save months of repairs and inconvenient showings. While you are comfortably in your new house we market your old house aggressively using MLS, Zillow, Trulia, Facebook, Google, yard-signs and a thousand other sites to get you the most offers and best offer in the shortest period of time. Once your old house is sold we transfer the new house into your name and mortgage. For all this convenience and certainty, you pay Knock the same 3% to sell your old house that you would pay a traditional broker/agent. In addition, the seller of the house we buy on your behalf pays us a 3% buyer broker commission, just like they would to any other broker/agent that brings them a buyer. If you are in doubt, see what dozens of our customers have to say about us on Zillow and Trulia. Thanks.”