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It seems that Knock.com is a real estate investment company operating under the guise of being a real estate brokerage. That's an important distinction since a brokerage is required to work under well defined agency relationships. State laws generally require clarity in those agency relationships in order to better protect consumers. What Knock is proposing tends to blur the lines of representation. On the one hand, they are working against the interests of the Seller by trying to purchase their house for less than market value. On the other hand, they are purporting to work on the Seller's behalf by purchasing their next house for them. This constitutes a conflict of interest in their role as they can't really represent the best interests of the Seller in both transactions.
There is no "change" in how Buyers make offers--they can do so however they wish. However, an unrepresented--or misrepresented--Seller would be well advised to be wary of the arrangement which is being proposed by Knock.com. Just as there are predatory lenders there are also predatory real estate investors (and I'm not saying that Knock is necessarily one of them). Both rely on taking advantage of people--either those with little knowledge of real estate or those they can fool.
The Knock FAQ presents a deep morass of confusion and semantic entanglement, along with Knock promoting themselves as broker/agent licensees and members of MLSs.
IF they are REALTOR®-members of REALTOR®-owned MLSs, COE compliance will take some real tiptoe work.
I question the ability of a principal in a transaction to work as a fiduciary to customers and the ethic of a licensee loosely promoting themselves as such.
Be wary of giving trust to anyone who claims "6% is the standard commission." They are either uneducated or unprincipled.
Never trust a licensee who would mention pop appraisals as a starting point for pricing. Dumb as hell, or crooked as a dog's hind leg, come to mind immediately.
On the one hand, they are working against the interests of the Seller by trying to purchase their house for less than market value.
'Market value' means the most probable amount that the home would sell for in an open and competitive market. That's not what this is - it's not on the open market and it's not put on the market in a competitive marketplace. It's a convenience transaction and the buyer takes the risk and puts up the money up front. No contingencies. No drawn out sales and marketing cycle. No weeks long period to close. No cost of commission or marketing expense to put it on the market. No risk premium for holding it on their books or discovering it has a big flaw, no cost of money for putting it all up front, etc, etc. It's like rolling up with your car to a dealer or wholesaler and leaving with a bag of money. You ain't gonna get 'market value' when you do that because it's not on the market. Basic stuff.
With respect, suggesting that this company can or should offer 'market value' shows a misunderstanding of what market value means. Market value also has nothing to do with whether or not the buyer is legally working in the interests of the seller. To suggest that it might shows a grave misunderstanding of how agency works. Even if they were able to hypothetically offer 'market value', they still should not claim that they are working in the interest of the seller. This company should stay away from any representation of 'market value' nor should they try to offer some twisted notion of 'market value'. It would be misleading and irresponsible to represent their offer as anything but just an offer. It should not be put out to the buyer as a 'market value' price, nor an 'appraised price', nor a 'fair price' nor anything other than just an offer. Meaning seller beware, do your own homework and don't be misled by any representation that anyone is working for your interest. Starting to suggest or imply that you are working in the buyer's interest because of 'market value' is a slippery slope that consumers can easily misunderstand.
'Market value' means the most probable amount that the home would sell for in an open and competitive market. That's not what this is - it's not on the open market and it's not put on the market in a competitive marketplace. It's a convenience transaction and the buyer takes the risk and puts up the money up front. No contingencies. No drawn out sales and marketing cycle. No weeks long period to close. No cost of commission or marketing expense to put it on the market. No risk premium for holding it on their books or discovering it has a big flaw, no cost of money for putting it all up front, etc, etc. It's like rolling up with your car to a dealer or wholesaler and leaving with a bag of money. You ain't gonna get 'market value' when you do that because it's not on the market. Basic stuff.
With respect, suggesting that this company can or should offer 'market value' shows a misunderstanding of what market value means. Market value also has nothing to do with whether or not the buyer is legally working in the interests of the seller. To suggest that it might shows a grave misunderstanding of how agency works. Even if they were able to hypothetically offer 'market value', they still should not claim that they are working in the interest of the seller. This company should stay away from any representation of 'market value' nor should they try to offer some twisted notion of 'market value'. It would be misleading and irresponsible to represent their offer as anything but just an offer. It should not be put out to the buyer as a 'market value' price, nor an 'appraised price', nor a 'fair price' nor anything other than just an offer. Meaning seller beware, do your own homework and don't be misled by any representation that anyone is working for your interest. Starting to suggest or imply that you are working in the buyer's interest because of 'market value' is a slippery slope that consumers can easily misunderstand.
In your never-ending quest to be argumentative, you are ignoring the simple fact that in order for this to work for Knock.com, they need to purchase any property at a significant discount so that they can then turn around and sell it and make some money. They won't be in business for long if they lose money (although many new ventures can lose money for years, burning up the cash of those who have invested).
I never said that the company should offer market value. (Please quit making stuff up.) It's a given that they couldn't afford to do that even if they wanted to. What I pointed out was that their objective was to purchase the property for less than it was truly worth. That is out of necessity--and that may be fine to a knowledgeable Seller. But since they also plan to help the Seller locate a new house to buy, they are entering murky territory. Just as a Dual Agency has many pitfalls, so to does this proposed arrangement. Do they plan to have a listing agreements? What type of agency disclosures will be involved, if any? The article didn't give any indication of the details involved. However, if you don't see the obvious contradictory roles which may come into play...then I don't know what else to tell you.
It seems that Knock.com is a real estate investment company operating under the guise of being a real estate brokerage. That's an important distinction since a brokerage is required to work under well defined agency relationships. State laws generally require clarity in those agency relationships in order to better protect consumers. What Knock is proposing tends to blur the lines of representation. On the one hand, they are working against the interests of the Seller by trying to purchase their house for less than market value. On the other hand, they are purporting to work on the Seller's behalf by purchasing their next house for them. This constitutes a conflict of interest in their role as they can't really represent the best interests of the Seller in both transactions.
There is no "change" in how Buyers make offers--they can do so however they wish. However, an unrepresented--or misrepresented--Seller would be well advised to be wary of the arrangement which is being proposed by Knock.com. Just as there are predatory lenders there are also predatory real estate investors (and I'm not saying that Knock is necessarily one of them). Both rely on taking advantage of people--either those with little knowledge of real estate or those they can fool.
According to their website, they do NOT purchase the old house. They are the listing agent and put the house on the MLS, claiming there is no catch other than a 3% commission, which in my recent experience of buying and selling in Charlotte, is what about 90% of agents expected. They apparently will also finance $10K of repairs on both homes. I thought maybe they might say “your house is worth $X, but if we put in $10K we can sell it faster for $X+$Y, but we’ll only give you $X+$10K, but it doesn’t even seem like that’s the case.
They also make a point to advertise that they think they can get a 5% discount on the new house by paying cash. I don’t really agree with that if the market is hot, but it will certainly help their offer get accepted. But my point is moreso that the fact that they’re advertising that leads me to believe there’s no real catch on the buying side too.
They seem to be marketing it towards millennials trying to trade up. Most of which IMO are pretty knowledgeable about their home’s worth, so I don’t think I’d compare it to the “We buy houses” signs. As far as I can tell, their business model is ensuring that they get 3% on both sides of the transaction and can sell the previous home quickly. Maybe they price it slightly under market value but a lot of traditional agents will do that too. There may be some other fees or something to make up for their carrying costs (their FAQ says they “don’t have lots of stipulations,” whatever that means), but if so and they’re not ridiculous it could still be worth it in a hot market. But if the market cools then buyers won’t really need the edge of the cash offer and it could take knock longer to sell the old house, plus more agents might be willing to take less than 3%. And now with interest rates rising that could negatively effect their buyers depending on how long the process takes for them to officially get the mortgage.
There was actually a “suggested post” on Facebook talking about it coming to Charlotte where I believe one of the higher-ups was answering questions (most of which from RE agents), although I can’t seem to find it now. So if you all have questions, might be worth a shot to ask them on fb...
It is actually the co-founder/CEO responding to most of the questions (most of which were from angry RE agents scared that they will lose business to this company)
I think someone just asked the specific question many were wondering about:
Quote:
"Sean Black, in addition to the 6% commission on the sale of the client's home, what other fees or costs are incurred by the client for the services you provide? Surely the 3% you earn from the sale and the 3% you earn on the new purchase side can't be your only source or revenue? There must be other other fees you charge for the extra services you provide."
"Great questions, Nick, thank you. Other than our fee, the customer pays us back the accrued costs we incur for the new home until the old one sells. Until the old home sells, you continue to pay the mortgage and utilities there, and we cover all bills on the new home, such as financing fees and utilities. Aside from that, if you choose to take advantage of our offer to advance up to $10K in repairs on both the new and old homes, you would need to reimburse that. We give you the option to roll all of this into your new mortgage or pay it outright once your old house sells."
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