Knock review: What it is and how it works

If you’re trying to figure out how to sell your house, chances are you’re also trying to determine how to buy a new one. The balancing act of doing both at the same time can create a lot of headaches — particularly in a competitive housing market. After all, when there are plenty of eager buyers out there, sellers don’t need to accept restrictive contingencies, like waiting for your existing house to sell first.

There are many companies that aim to help eliminate some of those frustrations, offering a range of features that enable you to purchase a new home while also selling your current one. Knock is one of them — read on to learn about what the company does, how it works and how much it costs.

What is Knock?

Founded in 2015 and based in Atlanta, Knock is a lending company that specializes in bridge loans to help homeowners buy a new home before selling their current one. As they say on their website, this enables customers to use the money “tied up” in their current home to purchase their next one — they call this process the Knock Home Swap.

Having the funds on-hand when you make an offer on a new home eliminates the need to make the offer contingent on your existing home selling, which makes your offer more appealing to buyers. In addition, moving into your new home before the old one goes on the market means you don’t have to live there during the time when it’s being shown or find temporary housing in-between.

The company has expanded in recent years and currently operates in 21 states across the country and Washington, D.C. Here’s a rundown of the locations where Knock is licensed to operate:

• Alabama
• Arizona
• California
• Colorado 
• Florida
• Georgia
• Illinois
• Kentucky
• Maryland
• Michigan
• Minnesota
• New Hampshire
• New Jersey
• North Carolina
• Ohio
• Oregon
• Pennsylvania
• South Carolina
• Tennessee 
• Washington
• Washington, D.C.
• Wisconsin

What does Knock do?

Homeowners who want to sell with Knock must be located in one of the states where they hold a lending license. If you’re moving out-of-state, that’s OK — the home you’re selling needs to be within the company’s service areas, but you can buy in any state. 

Knock evaluates three key pieces of information to determine how much they will loan you: how much your house is worth, how much you owe on your current mortgage and how much you’ll need to buy your new home. The more equity you have in your current home, the more you’ll likely be able to borrow. Knock charges a flat 2.25 percent fee of the estimated list price on every loan (yes, the estimated list price, not the final sale price). For example, if your list price is $300,000, your fee would be $6,750. 

If you qualify and your loan is approved, you can put those funds toward a down payment on a new place. The money can also be used for other real estate-related needs, like covering closing costs, paying off your current mortgage, moving costs and more.

Selling your home with Knock

In many ways, the process of selling with Knock is similar to the traditional home-selling process. For starters, you decide your listing price, not them, and you can use your own real estate agent to sell the listing (though you can’t do a “for sale by owner” listing).

Knock’s bridge loan is where the process differs. It comes with a purchase guarantee stating that if your home does not sell within six months, Knock will purchase it — however, it’s unclear how much the company will actually pay. Their website FAQs say the offer will be “calculated based on our market analytical models.” In any case, it claims that most of its customers won’t have to worry about it, because 92 percent are on the market for less than 90 days.

In addition, not all types of homes are eligible for the bridge loan. The company does not offer loans for manufactured, mobile or multifamily homes, for example, and homes with significant water or foundation damage, or in any unspecified “poor condition,” are also not eligible. Some condos might be eligible, but there are restrictions on those as well. There is also a maximum listing price beyond which they will not go: $1.2 million in most markets.

In addition to paying the 2.25 percent fee, Knock sellers are also responsible for paying their own closing costs — including, presumably, the real estate agent commission. And don’t forget that a bridge loan is just that: a loan, which must be paid back with interest.

Is Knock worth it?

Working with Knock can smooth your buying and selling path, particularly in highly competitive markets. But there are potential drawbacks as well.

Pros

• Eliminates some stress: Whether you’re worried about draining your savings for a down payment, paying two mortgages at once or finding a temporary place to live in-between selling one home and buying another, Knocks’ bridge loan can help reduce some of that anxiety.
• Makes your offer more competitive: Let’s say a seller is reviewing two offers: one that can close ASAP and another that is contingent on the buyer being able to sell their current home first. With Knock, your contingency-free offer will look a lot more appealing, giving you an edge over other buyers. 
• Comes with a backup offer: If for whatever reason you’re unable to find a buyer within six months, Knock will purchase the property — while you might not get full price with this option, it’s nice to have a bit of a safety net.

Cons

• High costs: Selling a house comes with plenty of costs already, including Realtor fees and closing costs, and Knock’s 2.25 percent fee eats even further into your bottom line. If you wind up selling for less than your list price, you’re still on the hook for the pre-negotiated fee based on the higher amount, and if you exercise the company’s purchase offer, you aren’t likely to get full price. And of course, the bridge loan will have to be paid back.
• Limited footprint: Knock isn’t available everywhere. The company currently operates in slightly less than half the country — 21 states plus Washington, D.C.
• Home restrictions: Knock deals primarily with single-family homes. Qualifying criteria for condos are complicated, and it does not accept mobile, manufactured or multifamily homes. It also does not work with homes that are in poor condition.

Knock alternatives

There are plenty of other companies out there that aim to make the homebuying and/or selling process easier. Consider these alternatives:

• Orchard: Orchard’s Move First program is similar to Knock, although Orchard sells the home, which means you don’t get to pick the listing agent, and it has a much more limited geographic footprint.
• HomeLight: HomeLight’s Buy Before You Sell program has a similar fee structure and purchase guarantee: The company will buy your home if it doesn’t sell within 120 days.
• Flyhomes: Flyhomes is another operation with a similar Buy Before You Sell program. It can also facilitate all-cash offers, and it provides a unique, AI-powered home-search tool.
• Homeward: The offer from Homeward, based in Austin, Texas, is a bit different: It buys your new home for you with a cash offer, and you buy it back from them after you sell your current one.
• Cash homebuyers: While Knock doesn’t accept homes in poor condition, companies that buy houses for cash do — they typically buy homes in any condition, no matter how rough, and they can close with incredible speed. The catch: They’ll likely offer a lower-than-market-vaule price.
• iBuyers: These online-only operations also buy homes for cash, and also close deals very quickly. However, iBuyers may charge steep fees, and they do not buy homes in bad condition.

Next steps

Before you decide to move forward with any option to sell your home, take some time to study your local housing market. How quickly are homes selling? And for how much? Whether you decide to work with Knock or buy and sell the traditional way, it’s smart to work with an experienced local real estate agent who knows your market well. By empowering yourself with more knowledge, you’ll be able to maximize your profit potential — and minimize your stress. 

FAQs

• How does a Knock bridge loan work?

  Knock provides homebuyers a loan that allows you to buy and move into a new home before you sell your old one. This means you don’t have to move into temporary housing in-between, and you don’t have to carry two mortgages at once — plus having the funds in-hand means your offer will not be contingent on your old home selling first, which gives you a competitive edge over other buyers. How much of a loan you’ll qualify for depends on several factors, including the value of the home you’re selling and how much equity you have in it. It charges a flat fee of 2.25 percent of the estimated list price of your property, which you can opt to pay out of your loan proceeds. You can use the money from the bridge loan to cover down payment and closing costs for the new home, prepare your current home for sale, pay for movers and more.

• Is Knock an iBuyer?

  No. Knock is a lender that specializes in helping homeowners borrow money based on the equity they have in their property. While an iBuyer’s goal is to purchase homes with quick cash offers, Knock’s goal is to sell your home on the open market — however, if your home fails to sell in six months, it will purchase the home as a fallback option.

• Is Knock a legitimate company?

  Yes. Knock was founded in 2015 and is led by CEO Sean Black, a real estate veteran who was also on the founding team of Trulia. The company is headquartered in Atlanta, Georgia, and is a licensed mortgage lender in 21 states and Washington, D.C.