I stumbled across an ad for a real estate service called Knock today that has expanded into DFW and am interested in what people make of it. It labels itself as a trade-in service, but my understanding is that for clients it purchases the new home that they wish to buy, moves them into the new home, and then after that lists their current home for sale. They charge the standard 6% commission on each sale, but that appears to be it in terms of costs (apart from usual closing & repair costs).

For the situation that my wife & I are in, this sounds sort of appealing. We are interested in downsizing our current home, but want to stay in the area. We would, however, rather just stay in our current home than settle for something that doesn't fit what we want, which makes listing our home at the start of the process risky for us. What Knock appears to offer might mitigate our worries, but the cynical part of me wonders if this is too good to be true. Does this business model make sense or am I missing something that should be a red flag?

Here is a Forbes article on the company: https://www.forbes.com/sites/amyfeldman/2018/01/22/as-competition-to-disrupt-home-sales-heats-up-startup-knock-plans-rollout-to-10-new-cities/#23cec1434408

What happens if they cant sell your old house? Or if it take 6+ months to sell? You will have to pay them back for all those bills. Definitely sounds too good to be true. They have to make their money somewhere other than the 3% commission on each end.

I appraised one of these deals.

The buyers were paying $350k for a house, but couldn't sell theirs. So they get involved with Knock and the contract for the home they wanted to buy is suddenly $370k.

Guess what?

It ain't worth 370k, so the deal crapped out.