RESEARCH TRIANGLE PARK – Real estate startup “Knock” is bringing its new approach to selling houses – offering “trade-ins” and a sales guarantee – to Charlotte and Raleigh.

Knock

While a growing number of real estate firms are offering sales guarantees, Knock also extends a trade-in option to its customers.

The company launched in the Atlanta real estate market in late 2016, offering sellers a simple guarantee—their house would sell within six weeks at the valuation calculated by Knock’s algorithm, or Knock would buy the house in cash at that price.

Knock guarantees that your house will sell at the market price within a set timeframe—this reduces or eliminates the uncertainty. And, if you’re also buying a house, Knock will help you navigate your move as well.

The company calls this process a “Trade-In”—and here’s how it works.

First, Knock works on your behalf to discover, negotiate, and buy your new house—in a cash transaction and guarantees pre-approval for any mortgage funding required. When the purchase is made, Knock manages home improvements and repairs for your new home and invites you to move in when you’re ready. Knock pays the bills for both houses while you’re in transition—and settles when the old house is sold. Once moved, the company manages and pays for repairs for your old house, places it on the market, and sells your house at or above the market price determined by the Knock algorithm. Finally, Knock manages the closing and transfers ownership of your new house to you and your family.

“Ultimately, our goal is to reduce the cost of the transaction to increase liquidity in the market,” said CEO and cofounder Sean Black. “Open up our platform to anyone and everybody, to open up transactions.”

In 2017, after completing their pilot in Atlanta, the company raised $33 million in venture funding led by RPE Ventures. Redpoint, Greycroft, Correlation Ventures, Great Oaks Venture Capital, Corazon Capital, and FJ Labs also participated in the round.

The company leveraged those funds to help more than 2,000 homeowners in Atlanta in 2017, and expects a similar number of homeowners to use the service in 2018 in Atlanta. Along with Charlotte and Raleigh, the company plans to expand to Los Angeles, San Diego, Phoenix, Chicago, Miami, Orlando, Tampa, and Denver by the end of 2019. The company is hiring 179 positions—nine in Charlotte and two in Raleigh—with more positions possible.

Why Charlotte, Raleigh?

Charlotte and Raleigh both earned a ranking on the Forbes America’s Fastest Growing Cities list, coming in at #18 and #4 respectively. Yet Charlotte ranks 11th in total population growth within the last decade.

Travel to the heart of either city and you’ll sense they’re both rapidly expanding. And when people move, many buy homes. With all that growth, the real estate market in both regions continues to pick up pace.

The growth in the market attracts investors. Next week, Knock will launch in the Queen City, their second market. Later this year, the company plans to launch in Raleigh.

These two real estate markets are really attractive to the startup, which seeks to disrupt the entire real estate industry.

“The homes look like the rest of America,” Black told WRAL TechWire about these markets. “Places like Charlotte have newer housing stock, there is more market data, and it’s easier to predict where pricing will be in the market.”

Sean Black

Both regions have an excellent quality of life and have seen an influx of technology companies and tech-savvy millennials that are just now entering the housing market. “People are leaving the suburbs, moving back to urban environments,” said Black, “and it’s still possible to do that in cities like Charlotte and Raleigh.”

Black, who serves as Knock’s CEO, and fellow co-founder Jamie Glenn were founding members of Trulia’s executive team, which was later acquired by Zillow. In building the Trulia real estate platform, Black saw the opportunity to democratize the buying side of the real estate equation. Prior to the rise of the Internet, real estate data could really only be accessed by brokers, and the market was highly inefficient. Companies like Trulia helped prospective buyers identify potential houses, research price and tax history, and compare properties and neighborhoods—without ever needing to contact an agent or spend an afternoon driving to properties. But the selling side of the equation hasn’t changed that much since, said Black.

It’s still paper-based. The 6% commission structure hasn’t changed. It still takes 40 days on average to complete a transaction between willing parties. Pain points still exist for sellers, which means they’ll also exist for buyers—50% of buyers are also selling a property, said Black.

“We see the opportunity in front of us to do for sellers what has already happened for buyers,” said Black. “You, the homeowner, get to see all of the information along the process of selling your home.”

“Selling is complicated,” said Black, “we want to tack a lot of value into that six percent commission.” Ultimately, Black hopes that Knock can reduce the existing inefficiencies in the real estate market and emerge as a marketplace for real estate transactions, reducing that six percent fee to three percent or even lower.

Local, local, local

The real estate crash in 2008–2009 and subsequent rebound has garnered a significant amount of interest in investment opportunities. Some companies bought up properties that were in default, renovated them, and flipped them. Some companies bought properties and turned them into rental properties. Some cities suffered significant loss of equity and thus loss of assets and wealth. Others didn’t. What the crash and rebound demonstrated, said Black, is that the national real estate market is really a confluence of dozens—hundreds—of localized markets.

With the rise of big data came the opportunity to disrupt the industry—for the benefit of individual consumers, not large real estate holding firms. Though far fewer people are underwater on their mortgages now than in 2009, that measure of market security may not be the best indicator to track, said Black.

Instead, the homeowners and property data that Black investigates are those that have equity in their homes and are paying mortgages on time—but don’t have enough equity or savings to move, even though they may wish to do so.

As the company grows, Black expects to offer these homeowners the opportunity to move to a new neighborhood so a family’s kids can attend a better school or be closer to their friends, or move to a larger house when the family is expecting an additional child, or downsize to a smaller place, or move closer to a park or open space. Whatever reasons a family has to move, Black wants Knock to help facilitate that transaction, reduce stress and anxiety, and one day make it more affordable by removing inefficiencies and bottlenecks from the process.

“The magic is when you’re feeling pain on both sides,” said Black, “We can remove that stress.”