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Current market conditions have made selling a home easier than ever before. Experts say, however, it has also left fearful, would-be sellers searching for alternative means to get into a new house once becoming buyers amid the market competition.

“In some markets with intense multiple offers, the best offer is no longer the highest price nor waiving the home inspection,” says Lawrence Yun, chief economist at the National Association of REALTORS®. “The fear among some sellers has been about getting a good price on the sale of a home, but then getting stuck and unable to buy in a competitive environment.”

As a result, tech companies offering “sale-leaseback,” “buy-before-you-sell,” and “cash-offer” services—coined “Power Buyers” in a recent zavvie study—have become attractive solutions for homeowners who need more time to find and close on their home purchase.

Alternative Options

Based on the report, tech companies offering services that expand buying and selling options for homeowners have enjoyed a year of surging activity amid the lagging supply and high demand.

The report found that sellers accepted 37% of offers provided by Power Buyers through June 2021, up from 31% in 2020. The average transaction price for those companies was around $430,000, outpacing iBuyers by 25%—or $344,000.

As a result, various tech companies featured in the report indicated a growth of cash offers provided to sellers ranging from double to 10 times the amount compared with the end of 2020.

“There has always been a sort of historical choice that is pretty binary in that you can either own your home or sell your home,” says Jarred Kessler, CEO and co-founder of Easy Knock. “At a very high level, we want to create more flexibility around homeownership.”

The company offers a series of tech-based, residential sale-leaseback programs. Easy Knock was among several companies cited in the zavvie report that has benefited from the growing competition in the housing market over the past year.

According to Kessler, his company has grown over 120% during the past year as the housing market boomed.

Like with most of the housing market changes in recent months, the pandemic merely accelerated many of the trends already growing in real estate, according to Sean Black, CEO and co-founder of Knock, a non-traditional lender, touting itself as a home-swap service.

“If you think about the evolution of real estate online, we talk about these mini revolutions inside the evolutions,” Black says. “This recent transformation, which we think of as the transaction revolution, is about verticalizing the transaction so it’s simple.”

The company offers two options: Home Swap and Knock Nest. Through these, sellers can either sell their home to Knock and pay rent until they’re ready to move or purchase their next home and sell to Knock afterward, paying only one mortgage at a time.

The Knock Home Swap loan covers the down payment on the new home, home prep and up to six months of mortgage payments on the old house.

Agent Buy-In

While the trend has been a windfall for several tech companies, experts say there may be an opportunity for real estate professionals as well.

“In every market—upmarket or down market—there are always these businesses that pop up, and that is what is happening here. Their play is to those who are struggling with how to sell and buy and not end up homeless,” says Anthony Lamacchia, CEO of Lamacchia Realty

According to Lamacchia, real estate professionals shouldn’t fear “Power Buyer” companies. Instead, he pointed out that they may help get some buyers and sellers off the sidelines by alleviating the “chicken and egg” challenges prospective sellers face in the market.

“I don’t think there is anything bad in there for us, and if anything, they could help some REALTORS® get some deals that they couldn’t get,” says Lamacchia.

Some Power Buyers have been quicker to collaborate with agents than others.

Self-proclaimed, do-it-yourself tool marketplace platforms like Homepie Inc. have touted their services as a “commission-free” method for people to buy and sell their homes and maximize their profits.

The company recently boasted that a client in Carlsbad, California, was able to list and sell their home for $250,000 over the listing price using the platform in lieu of a listing agent.

According to Kessler, Easy Knock has continued to work with agents amid the growing footprint of iBuying disruption in real estate.

“If an agent brings us a listing for our bridge product, we will give them the listing, and it creates less inertia for their customer and a better outcome, so we have a lot of great relationships,” Kessler says.

Black echoed similar sentiments, adding that they’ve worked to embrace agents across dozens of housing markets nationwide.

“As technology has become more pervasive, overwhelmingly consumers opted to work with an independent agent to represent them,” says Black.

Over the past year of the heated housing market, Knock has expanded from five markets a year ago to 50 and works with roughly 90,000 agents nationwide.

“We have seen, in leading up to the launch, that Knock is very agent-centric and partners with us in a way that we completely appreciate,” says Scott Parker, sales manager at John Greene REALTOR® in Chicago. “Consumers want convenience, and now technology and a lot of alternative methods are out there for consumers to get what they want at the click of a button. There are easier ways to do things, and that is why these platforms exist.”

Texas-based agent Kristi Keys with the Mike Mazyck Realty team has been working with Knock since November 2020 after testing out the company’s HomeSwap option herself.

“I was able to get down to the nitty-gritty of it and delve in with every question that you could ever imagine,” Keys says, adding that the program helped make the transaction process a little easier.

Armed with firsthand experience using Knock’s HomeSwap program, Keys says the additional flexibility has been an easy sell for her clients looking to move.

“My client is doing a swap right now; no questions asked,” Keys says. “I just explained how I did it for my family and the process and how it went. Being able to explain how much we were able to use from our equity to put down on our new home and have a little cushion [has helped].”

The Potential Downside

Though sales-leaseback is growing in popularity, it isn’t without its risks—the primary one being the transition from homeownership to renting.

According to Kessler, this lifestyle change puts the new tenants at risk of eviction if they can’t afford rent.

“We’ve only evicted eight people in the history of our company, so it’s a very low amount, and we pride ourselves on trying to be compassionate,” Kessler says.

Homeowners that use Easy Knock’s Sell-and-Stay program also have an option to repurchase their home at any time. Though he didn’t offer an exact number, Kessler indicated that a “healthy amount” of clients tend to repurchase their homes.

Knock’s Home Swap services have additional things for clients to consider, particularly that the company’s bridge loan puts a lien on their property until the funds are fully paid. The company will, however, pay for approved costs, but if any additional fees or expenses that arise fall on the seller.

Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to jgrice@rismedia.com.

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