10.21.26 Electronic Mailbag; Knock’s Sean Black on Buy Before You Sell; Treasury Risk Haven

Robbie Chrisman Welcome to the Chrisman Commentary, Daily Mortgage News Podcast. I'm your host, Robbie Chrisman. Topics on today's episode include a little electronic mailbag, my interview with Knock’s Sean Black, on the company's Buy Before You Sell program, which allows homeowners to access their existing home equity to purchase a new home before selling their current one. And in the capital markets, there's no sign of flight to quality as there was in the past. Thanks to today's podcast sponsor, Experian. Experian verifies integration with Workday gives mortgage lenders broader access to reliable, up-to-date income and employment data, streamlining verification, enhancing efficiency, and delivering a smoother borrower experience from application to closing.com slash business slash products slash Experian dash verify. Let's see what's up in my electronic mailbag. Robbie, is it true that LO's can now join the MBA directly? Yep. There's MBA Homebase. The link is at ChrismanCommentary.com that provides loan officers with education, coaching, professional development, and a stronger voice in the mortgage industry. It's open to loan officers at every lender and across every origination channel, regardless of whether their company is an MBA member. Robbie, I watched President Trump talk about Montana being helped financially by Fannie and Freddie. Is that legal? Ha! Define legal. Montana has about 10,000 sales a year. 3 billion divided by 10,000 is $300,000. He's just saying that Fannie and Freddie are going to keep doing what they always have done. Facilitate home loans. Or will Bill Pulte have state-based loan-level price adjustments, which some may view as politically based. I'd say stay tuned. Robbie, since Clinton and Congress last balanced the budget, we've had a deficit. Why do we care now? First off, it's a huge, unimaginable number, and no politician even wants to talk about it. Let's face it, we're spending money that we don't have. One in five Americans fell behind on a loan or mortgage payment in 2025, according to new data from the Federal Reserve. That figure is up from one in eight Americans in 2022 and marks the highest level since 2007. Why is it happening and what will it mean for the economy? The U.S. housing market continues to weaken as elevated mortgage rates, high home prices, and limited affordability drove pending home sales down a record 7.3% in September, and housing starts down 5.2%, while declining building permits signal limited near-term construction growth. Despite relatively resilient new home sales, scarce existing home inventory, rising construction costs, and builder confidence at a 14-year low are prompting price cuts and sales incentives, revealing the disconnect between persistent housing costs and weakening demand. Continued pressure on purchase mortgage activity is likely to constrain new construction and reduce agency mortgage-backed securities issuance, as high financing costs discourage buyers and limit builders' willingness to expand supply. Prior to founding Knock in 2015, he was on the founding team of Trulia, spearheading growth and revenue. He's also an investor in tech companies that bring radical transparency, convenience, and savings to consumers, including NerdWallet, SeatGeek, Paint Zen, Zeal Peach, Porch, and FX. Maybe we should start with the origin story here of Knock, because obviously the buy-before-you-sell space has evolved, but Knock essentially pioneered the entire buy-before-you-sell space. And so I'm hoping you could talk about the opportunity you saw, the inception of the company, and how it's grown to where it is today. Sean Black Yeah, sure thing, Robbie. So my co-founder and I, Jamie, had started the company in 2015, but we had both been on the founding team at Trulia. And so we saw what we were doing at Trulia as democratizing the information that buyers and sellers needed to make the biggest purchase or sell, otherwise. And obviously, uh we and Zillow did a huge amount or you know, huge leap forward in helping consumers get access to information that they needed and educate them about the biggest decision. But there really nothing had happened by the time we both went public and then merged. That was a huge win for consumers. But what it wasn't a win for was sellers, because there was no more transparency in selling your home. And then uh there wasn't a cost savings in selling your home, uh, and there wasn't any more liquidity in selling your home. So what we set out in 2015 to do was sort of like do what we did for buyers at Trulia for sellers at Knock, and that was to create transparency and liquidity in the process of selling a home. Uh, and so that's what we set off to do in 2015. Robbie Chrisman I want to go back even further. And this is a non-sequitur in a lot of ways, but you got an MBA in entrepreneurship, you've been named innovator of the year. At what point would your parents have said, yeah, Sean's gonna start his own company? Was it a lemonade stand, or at what point when you were a kid was like this guy's this guy's gonna be an entrepreneur? Sean Black I was reading Inc. magazine and entrepreneur magazine when I was probably 15-ish. I don't know if they would have said I would have started a business, but yeah, my brothers both started businesses actually in the construction world. So I think they had an inkling when I was a late teenager for sure. A lot of you were by the way, part of the reason for that is my dad worked for what is now Dow Chemical Company for his entire career. It was sort of above that generation where you worked for one place, and I don't know if you just want to be the opposite of your parents, but I just wanted much more freedom and dynamic range within my career. Robbie Chrisman You are all about revolutionizing how people buy and sell homes. I want your thoughts on where we are headed, because it's almost if you know where you're going or you think you know where things are going, and Wayne Gretzky always skated where the puck was going, you can work back from that and figure out a roadmap. What does the buying and selling experience, the overall housing landscape, what does it look like to you 5, 10, 15, 20 years from now? Sean Black You know, five years, unfortunately, in this world isn't enough, although maybe AI will change that in terms of collapsing time. But what it should be is as liquid and transparent as the stock market, you would hope. Right? Obviously, a physical asset, so it's not going to be quite that liquid in terms of getting in and getting out, but it feels still like there hasn't been enough progress. There's a great deal of inertia in this in this industry. Obviously, there's a lot of regulation that you have to fight through, similar to other spaces that haven't transformed enough, like healthcare, which is also being more quickly transformed with AI. But there should be a lot more certainty and convenience to buying and selling a home so that you can make plans around where you want to live, where you want to work, where you want to go to school, where your kids go to school. So I would hope we would be leaps and bounds toward that end in at least 10 years. Robbie Chrisman Maybe I buried the lead here a little bit because you're all about the buy-before-you-sell space. You're solving this problem of using the money that's tied up in your current home to purchase your next one. You just talk about the opportunity there, why you view that as something you really want to sink your teeth into. Sean Black It's about creating liquidity, like I said, I mentioned before. And so to buy before you sell was you know, we iterated quite a bit on how we went about this, but the idea was always create liquidity and transparency in going between two homes and being able to do it more instantly. I mean, you can drive your car into a car dealer and come out the other end the same day. It's still painful, uh, hours later, though, uh, with another car. It would sure be nice if you could do that with a house. Robbie Chrisman For lenders, this obviously means closing more deals and faster. Any figures out there that really jump to mind that provide a good example of benefits here? Sean Black Qualitatively speaking, the biggest thing lenders say about what we do is get people unstuck. And so there's obviously all of this friction in picking a home, making an offer on it, not knowing if your home is going to sell. There's a lot more people that clearly, when using this, do buy and sell and do so very quickly. A lot of people, you know, the unstuck part is lenders feeling like these people would otherwise have just not transacted at all. They've been waiting so long, maybe they got a couple of their offers beaten by other cash-like offers. And so, yeah, if this was all easier to do and it was cheaper to do because it was easier, obviously more people would do it, especially in a rate environment like this where affordability is challenged. The transaction fees within buying and selling a home, if they're collapsed, make it much easier to do it. I mean, if you just think about how long you have to wait right now, just to, you know, in appreciation terms, just to get back all the money you invested when you closed the home you own, that could go away. Robbie Chrisman Especially with amortization schedules where people are paying mostly interest at the beginning of a 30-year mortgage. The mortgage industry, too, its credit, has come a long way in terms of products that are really benefiting people out there. I think about the DSCR space and allowing investors to be able to accumulate more rental properties. I think about the home equity space and allowing people to tap into their home equity. I think about the buy-before-you-sell space. What were historic PR hurdles that you had to deal with? Whether, and and I mean that more so in terms of convincing lenders to work with you than buyers out there ultimately, but I guess you could talk about both. Hurdles out there from a PR perspective and how that narrated how you've kind of moved past those or have eroded some of those barriers or objections. Sean Black When we started the buy before you sell, we weren't doing bridge loans, but I will say when a couple years in when we started, bridge loan was an integral part of it. Bridge loans had like a bad connotation for people. I don't even know that we were as aware of it, and or in a sort of legacy reputation. So we had to overcome what that meant. So having something buy before you sell was the goal. So a bridge loan is sometimes helpful for that in previous versions of it. I think the bigger hurdle, at least at the industry level, is doing anything different, changing workflows. When we launched Trulia, when it was agents, I think they feared what the what was unknown and what was different. And so the hurdle there was just overcoming that fear of the unknown. I think in when we launched with the buy before you sell, there was a little bit of that because we worked initially with consumers and then agents and then you know, and then lenders. And so it was a little bit of the fear of the unknown and just doing something that was not traditional and not within the current the existing workflow. So we increasingly had to sort of like evolve into what was as easy to bolt into or click into their workflow as humanly possible. Robbie Chrisman And I have it's almost a personal question, but I think a lot of people have another. There's no contingencies involved with what we're doing here. How do you actually have a contingency-less product? Sean Black Again, so the buy before you sell, we are giving you the access to all the equity that everyone's earned uh over and built up over the last several years and all the years of appreciation that we've had. So there's record equity in homes right now, which is great. But you're often your other assets are otherwise tied up, your other cash assets. So you need the house, the money out of your existing house to buy your new home. So we're giving you that up to a million dollars. Now we're actually going to go higher than that in many cases uh or many states. But what we're doing, so that's giving you your access to your capital. So the contingency less portion of that is we're also putting a backup offer on your existing home six months out. So we want to work with you and your lender and your agent to get your house on the market. We give you funds to fix up that house and get it ready for sale and sell it on the open market for as high a price as possible in the event for some reason that doesn't happen. And with us, at least it doesn't, it often happens very quickly. But six months later, we will buy that house for an agreed upon price up front if that house doesn't sell. And just having that offer, it's a basically a contractual offer, allows your new mortgage to ignore your old house. So that as far as it's concerned, there is a contract on that house sitting out there. You we can now ignore that mortgage because that's the you know, you may have other better offers in before that, but at worst, you have an offer six months down the road. Robbie Chrisman There are obviously options in the buy-before-you-sell space. You have competitors, I have competitors, what I do. Everyone has competitor. Yeah. How does one company differentiate itself in the buy-before-you-sell space? Why do you feel like you're the best one out there? Sean Black To your point, we pioneered the buy before you sell. So we evolved through versions that worked less optimal than the one we are now. I'll give you an example. We are a we charge one flat fee, which is based on the list price of your home. We charge no interest during the whole entire period that we have lent you the money that up to six month period of time. We're charging you a little over 2% of the existing price of your home as a total fee for all the services we provide, which is obviously the capital that we're giving you up to and soon over a million dollars, uh, as well as helping you fix up the house, paying off your existing mortgage. By the way, we can use it to pay off credit cards, you can use it to pay off car loans, you can use it to buy down points now, if you like. So we're helping you do all of that for a fixed fee. Other providers charge on an interest basis. We tried that in the beginning, thinking it was the more conventional way to do it. You're you sort of understand interest as a consumer on a mortgage, but nobody wanted the clock. What we learned pretty quickly was that consumers wanted certainty. So the fixed cost pricing, no running meter, not knowing how long a house was going to sell the your old home, and not knowing how much this was really gonna cost and how much equity you were really gonna end up with was one of the big ways we differentiated ourselves. Others were doing a la carte pricing, so they're charging for the backup offer separately, they're charging for the interest on the loan, they're charging an origination fee. A lot of it is obfuscated so that you actually don't know the real cost. Sometimes our lending partners who try these other products, they don't even, they aren't even able to figure out what the total cost of other products are. And then there's options where you know the whole other category of iBuyers, if you just want to sell your house outright to an ibuyer, then that's an option too. And you just don't know, you you don't get the benefit of having obviously been on the market and selling at the highest price. Robbie Chrisman The website is knock.com. What a great URL. Any other things worth sharing with listeners today? Points out there that begin. Sean Black Yeah, I mean, look, in today's market, this product is really great to compete with cash offers. In a buyer's market, which we're heading into, it's really great for sellers to have certainty because it may take longer now to sell your house. And by the way, houses are cheaper. The one you want to buy is probably on sale. And so with a cash offer, you can get a better price, know that you have more time with your house. You can use the equity in your home to buy the rate down on the new mortgage. So there's a lot of advantages in different markets for this product. There's sometimes the thought that it's good in one market without another, but we've built the product specifically to evolve as the inevitable real estate market goes through its cycles. Robbie Chrisman Very cool. Good stuff, man. I really appreciate it. Thank you for the time. Sean Black Thank you, Robbie. Appreciate the interview and the time. Robbie Chrisman Although mortgage rates have crept up, U.S. treasuries have experienced volatile range-bound trading as investors balance geopolitical tensions, rising oil prices, persistent inflation concerns, and anxiety over elevated technology valuations. Despite inflationary pressures and a broader global shift toward tighter monetary policy, risk aversion has recently supported treasury demand. Treasury's traditional safe haven role has been weakened by the post-2021 inflation environment and the Federal Reserve's policy response. The recent market movements suggest that role may gradually strengthen if inflation subsides. Later today brings weekly crude oil inventories and a treasury auction of $13 billion in 20-year bonds. We begin Wednesday with agency MBS prices roughly unchanged from Tuesday's close, the two-year yielding 4.79, and the 10-year yielding 5.11 after closing yesterday at 5.12%. Let's wrap up with a joke and some housekeeping. Voting in America is like cleaning up after your dog. But it's your duty.