For nearly a decade, tech companies have been trying to change the traditional home-selling process.
iBuyers first appeared around 2014, making it possible to sell your home online as easily as collectors sell their stuff on eBay. iBuyers’ products are aimed at homeowners, making it possible for you to sell your home without having to list, repair, or open it up for sale to strangers.
Now, there’s a new breed of troublemakers called “power buyers” trying to streamline the process for buyers.
Companies like Knock, Orchard, Homeward, Ribbon and Accept Inc. offers cash incentives, bridge financing, and “buy before you sell” programs that allow buyers to buy a home before selling an old home.
Power buyers are like a rich uncle, offering upfront dollars so you can make an offer to buy a home in cash.
Knock co-founder and CEO Sean Black – who also helped found the online real estate site Trulia – says power buyers are just the latest development in what he calls a “revolution”. transaction network”.
“We are all collectively trying to fix a very broken transaction,” Black said in a recent fire chat moderated by Southern California News Group. “We are trying to break the conflict and make the process streamlined, giving consumers transparency, convenience, certainty and ultimately cost savings.”
Some electricity buyers charge for their service. Others, like New York-based Knock, offer a mortgage on your purchase.
Knock starts by offering a mortgage pre-approval, then offers a six-month interest-free loan based on equity in the buyer’s old home. The buyer can then make an offer as if they were an all-cash buyer. If their offer is accepted, Knock provides a mortgage as well as funding for the down payment and repairs to the old home.
Buyers are free to move into a new home, repair the old home and sell. Knock also offers a backup offer to buy your home if it doesn’t sell within six months.
Black said his company financed nearly 900 home purchases in 2021, but only bought one home that didn’t sell for six months.
“We are all outsiders,” Black said of real estate innovators. “It always happens with innovation because we don’t know what we can’t do. … I think it takes a fresh, outside perspective to fundamentally change trading. To re-imagine it basically. “
This is an edited transcript of Black’s talk, given on December 7 at the National Association of Real Estate Editors’ convention in Miami.
Q: What is the “Transactional Revolution”?
A: If you look at where we were in the early 2000s, it was really about a digital revolution and (for real estate sites) it really brought classified ads out. from newspapers or MLS books – old MLS books. – and put them online.
It’s pretty one-way. You don’t get any context around those lists.
That’s where Trulia and Zillow really come in. Trulia came along in 2005 and provided school information, crime information, and heat maps. In the case of Zillow, it was initially about Zestimate and democratizing the buyer.
It is clear that consumers now have more information than they could possibly want.
By the way, that’s not good for real estate agents either because they’ve spent a lot of time educating consumers over the months and months, who may or may not have ever transacted.
Q: So that changed the home buying process. But does it change the transaction?
A: What it did was provide better information to buyers, but it didn’t give sellers more transparency, more convenience, and certainly no more cost savings.
There is still a lot of confusion about what will happen, when it will happen, and there is a lot of uncertainty.
Our thesis is that if we could make trading less stressful, more secure, more cost-effective, it would be twice as many people. Now, 16 years later, more than six times the number of visitors searching for the top three sites and only 20% more people trading.
We think there is an opportunity to turn many of these people who want to trade into trades.
And the way to do that in the market is to create liquidity. Obviously we don’t have that in real estate. With so much friction and cost as well as inconvenience and uncertainty, you have more needs than you can afford.
Q: So how do you help create more certainty and less friction?
A: A big part of the problem is that 2/3 of the people who are buying are also selling. Americans are rich and cash poor. So you play a game of throwing eggs to see if I sell my house first and move out?
You can sell your home now in three days, give or take. But then you will be homeless. And you still have a mortgage reserve, and you’ll be outbid by someone who doesn’t have one or doesn’t need it.
Q: And how do you create liquidity?
A: What we do effectively to create liquidity is we make all buyers cash buyers.
Our first product, originally called Trade In and now called Home Swap, was focused on attracting two-thirds of people who have a lot of equity in their homes, but no lots of time and not much cash.
We let them buy their new home. We don’t just lend them a mortgage, but we lend them all the money they need to prepay and repair the old house. And what we do, effectively, is bring them to market with their real estate agent as an all-cash institutional buyer. And then they can win the bidding wars.
We’re using data science to underwrite not only you, but your old home, and lend money from your old home so you can buy a new home and move in. And as soon as you move out, we’ll basically let our contractors in and get the old home ready to be listed and you’ll get 100% of the profits.
Q: Power buyers offer a solution in today’s busy market for homebuyers who consistently outbid because they have to sell their current home or have a backup mortgage. But what if the market slows down and it’s no longer competitive enough to buy a home? Will electricity buyers’ demand dry up?
ONE: Consider 2008 the worst case scenario for the housing market. The year before that, 5 million homes were sold. In 2008, during the crisis, 4 1/2 million homes were sold. Less than ten percent. Homes will always be bought and sold. Everyone moves. And people will keep moving.
About Sean Black
– Title: Co-Founder and CEO
– Organization: Knockaway Inc., aka Knock
– Location: New York City
– Education: Bachelor of International Business at Penn State, MBA in Entrepreneurship at Babson College
– Previous job: Three years as vice president of New York real estate company Corcoran Group, founded by “Shark Tank” personality Barbara Corcoran; and a member of the founding team of Trulia.com, a leader in growth and revenue.
https://www.mercurynews.com/2022/01/20/qa-this-startup-wants-to-transform-and-speed-up-how-you-buy-a-home/ This startup wants to transform and accelerate the way you buy a home