Use Home Swap to Buy and Sell a House at the Same Time

Both buying a home and selling a home can be difficult endeavors. And trying to do both at the same time? That can feel downright impossible. Fortunately, solutions exist, including Home Swap, an innovative bridge-like loan program that helps take the stress out of such a tricky transition.

Home Swap, founded by a real estate company called Knock, offers a novel approach to buying and selling real estate, with financial tools that let you purchase your dream home first and worry about your current home later. There are some big added perks, like up to a $25,000 advance toward pre-sale home improvements. Here’s what to know about it, including answers to some commonly asked questions about the program.

What is Knock Home Swap?

Home Swap is a loan program designed to help current homeowners buy a new home without having to sell their existing home first. It functions similar to a traditional bridge loan, which is a short-term loan that people can use in the lead up to securing long-term financing. Instead of having to sell first and then find temporary housing while searching for a new home to buy (or worse, take on two mortgages), homeowners get the flexibility to close on their new home and then go through the process of selling. That means no double mortgages and no juggling timelines to try and minimize the period in between closings.

How does Knock Home Swap work?

The Home Swap program works like this:

• • Homeowners get pre-approved and fully underwritten for a homebuying loan with Knock, the company behind Home Swap. Secured at a convenience fee of 1.25% of the new home’s purchase price, the loan also includes a down payment advance. (Home Swap users can pay that 1.25% can at closing or roll it into what they borrow.)
  • When they find the home they want to buy, the purchasers put in their offer without a sales contingency—meaning they do not have to sell their previous home to close. Upon move-in, they’ll start making payments on their new mortgage while a Knock Equity Advance covers payments on their old mortgage for up to six months.
  • While settling into their new home, the homeowners will list their old home for sale. If they need to make any improvements before the sale, they can take out up to $25,000 in Home Swap loans for the job.
  • Homeowners sell their old homes using a real estate agent of their choice. Suppose the home doesn’t sell on the open market within the six months that mortgage payments are being fronted through Home Swap. In that case, homeowners have the option to sell their home directly to Knock for a pre-determined offer—usually about 80% to 85% of fair market value for the property.

  Just like with a standard home loan, Knock sells your loan after you close, and you’ll make your mortgage payments to the company that buys it. Payment for the Home Swap loan is a 1.25% convenience fee.

  What are the benefits of using Home Swap?

  The biggest benefit is that homeowners do not have to sell their current home before buying their new one. This is a huge advantage since most people don’t have the financial flexibility to take on the risk of paying two mortgages at the same time. Of course, you’re still paying for your first mortgage with Home Swap, but it’s rolled into the amount that you borrow so that you won’t be cutting two checks every month. Also, because you’re moving before listing your first home, you don’t need to find a way to juggle everyday living with open houses and showings.

  Another major benefit is that buyers can avoid a sale contingency, which prevents them from closing if their old home doesn’t sell. This provides more assurance for both buyer and seller, the latter of whom might find the buyer’s offer more attractive as a result. The offer itself functions largely like cash since Knock guarantees that the loan will be funded on closing day.

  Home Swap vs. traditional lending

  Once you close on your new home and your loan is sold, it will be indistinguishable from a traditional mortgage. The main differences between Home Swap and standard lending occur before closing, plus the services you get through Knock Home Swap for selling your original home.

  Keep in mind that with convenience comes fees, so while you certainly might get more bang for your buck with Home Swap, you’ll pay extra for it through that set 1.25% convenience fee, which may be more than the origination fee you would have secured on a traditional loan.

  What’s the same?

  Closing costs

  You’ll still owe all normal closing costs if you go with Home Swap, including title-related fees, attorney fees, and lending fees. The one difference here is that if you go with Home Swap, you’ll also owe a 1.25% convenience fee; however that can roll into your mortgage if you don’t want to pay it at closing.

  Varying rates

  As with any home loan, your rates will still depend on your qualifications. The better your credit and the less risky of a borrower you are, the better terms you’ll get on your loan, whether that’s with Home Swap or with another lender.

  Flexible housing options

  Like with any home loan, you can use Home Swap to buy and sell various housing types. Condos, townhomes, and new construction are all eligible and will not preclude you from getting financing.

  What’s different?

  Non-contingent financing

  So long as your qualifying information doesn’t change between when you’re approved and when you close, you’re guaranteed cash-backed, non-contingent financing with a Home Swap loan. This gives the seller 100% assurance that financing will come through on closing day, regardless of whether your other home is sold.

  No-sale contingencies are possible with traditional lending, but because they’re risky for lenders, you’ll need to have the cash to support them. Home equity loans, bridge loans, or savings are ways to do it, but they’ll exist separately from your new mortgage.

  Market availability

  You can get a traditional mortgage anywhere, but Home Swap is only available in limited areas. As of January 2022, the program operates in select metropolitan areas in 15 states (with plans to expand to more than 100 markets in the next couple of years): Arizona, California, Colorado, Florida, Georgia, Illinois, Maryland, Michigan, Minnesota, North Carolina, Oregon, South Carolina, Tennessee, Texas, and Washington. Visit Home Swap’s Cities page for a complete list of locations.

  Closing date guarantee

  If you’re in a hurry to move to your new home, you’re in luck. With Home Swap, you’re guaranteed a 30-day closing period on your purchase, and if it extends past that time, they’ll give you $5,000.

  Improvement funds

  If you need some extra cash to improve your current home before selling, you can use Home Swap’s Home Prep service to secure up to $25,000 toward your projects. Knock will even onboard the contractors of your choosing and handle the payments once you’ve signed off on the completed work. With a traditional home loan, you’ll have to finance any fixes and improvements through alternate means, such as a home equity loan, personal loan, or credit cards.

  Knock Home Swap reviews

  Is Knock Home Swap legit? Yes, Home Swap is a real program that homebuyers can use to buy a home and sell one at the same time—or use to purchase a home as a first-time buyer.

  Reviews are quite favorable, and Knock currently has a B+ rating through the Better Business Bureau (BBB). We were glad to see that the company responds to complaints, though they are not all resolved (at this time). You can also view Knock Home Swap reviews on Trustpilot, though their rating there is slightly lower, with seven reviews averaging 3.3 stars out of 5.

  Other options for buying and selling a house at the same time

  Home Swap is a nice option for buyers who also need to sell, but it’s not the only one. If you’re in the market to buy and sell at the same time, here are some of the other ways that you can finance the move.

  Home Equity Line of Credit (HELOC)

  A HELOC is a loan that allows homeowners to borrow up to the amount of equity in their current home. The longer you’ve lived in your current home, the more equity you’ll have in it—and the more you’ll be able to borrow with a HELOC.

  HELOCs are sort of like credit cards in that you have a set limit to the loan (your equity balance), and you can take out what you need when you need it. To buy a new home, however, you can go ahead and take out as much of the limit as you need and then put that toward your purchase.

  Note that while a standard HELOC repayment period is about 20 years, you have to pay back the loan in full before you close on a sale of the property. That shouldn’t be an issue as long as you can sell your home for at least as much as your mortgage is currently worth.

  Bridge loan

  Home Swap is an example of a bridge loan, a short-term loan that you can take out to “bridge” the period between buying a new home and selling your old one. A standard bridge loan (also known as a swing loan or gap financing) won’t come with the additional perks of Home Swap, but it could still be a good choice depending on your circumstances.

  Like a HELOC, you’ll borrow against your home’s equity with a bridge loan. Unlike a HELOC, you don’t have an extended repayment period that can hold you over if your home doesn’t sell right away. Bridge loan repayment periods usually start after 12 months, at which point you’d be responsible for paying back the loan and paying the mortgage on your new home, provided you weren’t able to sell.

  The benefits to a bridge loan are the flexibility it affords and that it gives you the ability to put down a non-contingent offer and, potentially, a higher down payment as well. Drawbacks include the aforementioned short repayment period, high interest rates, and additional closing costs.

  Instant Buyers

  An Instant Buyer, or iBuyer, is a company that circumvents the normal real estate sales process by buying your home from you and then taking on the task of marketing and selling it once it’s out of your hands. This is a relatively new type of company and service. It has faced a bit of controversy. One big-name iBuyer closed up shop after consumer complaints they were driving up prices on purpose. The company itself says they shut down the program because of inaccurate price forecasting and too much inventory.

  Controversy aside, iBuyers appear to be an emerging trend that could assist homebuyers with a property to sell. It’s an attractive premise, but it comes with some variable costs. This includes a service fee of 5% of the sale price of your home, and iBuyers will also deduct the cost of any necessary pre-sale repairs from your net proceeds. They’re also not currently available in all markets, so iBuying may not be an option where you live.

  Turn your home into a rental

  Another option to consider when buying a home when you already own is to rent out your current home and use that money to pay your mortgage until you’re ready to sell. It could be easier to find a renter than a buyer for your home, and if home prices are down or it’s a buyer’s market, it will allow you to ride it out until you can (hopefully) sell for money.

  There is one significant downside to going this route, and it’s that renting out your home doesn’t give you any cash on hand to buy your new home. You’ll be limited to savings and a new mortgage for the financing on the home you buy, and you’ll still be in the position of having two mortgages at one time. That might not be a problem if you’ve got enough cash, but it’s understandably a bit difficult to manage otherwise.

  Should you use Home Swap or another option to buy and sell?

  Which way you ultimately decide to go when buying and selling simultaneously depends on several personal factors, such as your current financial situation and the real estate market in your area. To help you navigate your options, we recommend working with a financial planner and a qualified real estate agent. With a bit of research and planning, you should be able to find the perfect option for your needs and successfully buy that new dream home without having to sell your current home first and figure out short-term housing in the interim.