Alerting home shoppers to new listings. Helping buyers make an all-cash offer. Buying houses outright. There has been no shortage of real estate startups arriving in recent years, promising to overhaul the business of buying and selling homes.
This week, two more entered the fray in Seattle, both saying they can give a leg up to buyers navigating a fierce sellers’ market: the ability to buy a new home before they sell their old one.
Knock, a startup founded in 2015, offers mortgages and bridge loans, which buyers can use to cover a down payment on their new house, plus up to six months of mortgage payments on their old house and funds to get the old house ready for listing.
That makes a buyer “competitive with cash buyers,” CEO Sean Black said in a statement. The company charges a fee of 1.25% of the new home’s purchase price.
Orchard, a brokerage, offers a slightly different model: The company buys a client’s new house with cash, making their offer more attractive to a seller, then sells the old home.
“Cash is always king,” said Hilary Britton, the company’s regional sales manager in Seattle.
The customer pays a 5% to 6% listing fee for the sale of the old home, plus a daily holding fee for the time spent living in the new house before the old one sells.
Both companies offer guarantees if the old home doesn’t sell.
Knock and Orchard join local startup Flyhomes, which offers a similar service. Knock is launching in a handful of other Western Washington markets, too, including areas around Bellingham, Bremerton and Olympia. Orchard recently launched in Portland.
In Seattle’s tight housing market, brokers say would-be sellers sometimes hesitate to list their old home for fear they won’t be able to find the right new house in time.
“We have a stalemate, a logjam in our market,” said Chris Ranch, a Federal Way-based Keller Williams agent who plans to help clients use Knock’s service.
Buyers who could once secure a house with a contingency that the deal would close once they sold their own house have a far harder time doing that today.
“There are so many buyers that are able to make an offer not contingent on their home selling that for people who do have a home to sell, trying to get that offer accepted … is extremely difficult,” Ranch said.
But it’s not clear how long that will last.
Home prices and competition have skyrocketed since the start of the pandemic, as low interest rates drew buyers into the market. Yet most economists expect the market to begin to cool down this year, driven in part by rapidly rising interest rates.
That could tamp down the need for special products that help buyers compete or raise the risk that homeowners aren’t able to sell their old home for the price they anticipated.
For now, inventory is slim. Last month, it would take less than two weeks to sell all the homes for sale in King, Pierce and Snohomish counties, according to the Northwest Multiple Listing Service. The listing service considers four to six months a “balanced” market.
“The market has been frenetic. That can’t carry on,” Windermere Chief Economist Matthew Gardner said. “But it is still supply starved.”