Held July 30-August at Inman Connect Las Vegas. On January 1, 2024, the noise and misinformation will be cut away, all your big questions will be answered, and new business opportunities will be revealed. join us.
According to NPR, the fast-growing sale-leaseback platform EasyKnock is facing consumer lawsuits in Texas, Maryland, South Carolina, Pennsylvania and Ohio, as well as lawsuits from the attorneys general of Michigan and Massachusetts over its business. behavioral enforcement actions.
In a lengthy investigative piece, NPR said it analyzed 423 properties purchased by EasyKnock in Texas and found that the transactions “cost some people tens of thousands of dollars in equity, and the vast majority will not buy them back.” own house.
EasyKnock told NPR that the civil lawsuit is “meritless” and that it is working with the attorney general to investigate its business practices. The company says if a homeowner loses money on a sale-leaseback, it’s because of personal circumstances or the local real estate market.
In a statement to Inman, a company spokesperson said, “Several parts of the initial story and follow-up questions indicate strong opposition to sale-leasebacks; or at least a limited understanding of how they work. The story also does not explore macroeconomic conditions, such as Long-term high interest rates, and the role of the housing market, are obviously beyond our control.
EasyKnock told Inman that NPR’s finding that most people won’t buy back their homes is misleading because “most people we deal with haven’t reached a decision point about moving yet.” [that option] …The vast majority are still renters and have yet to share their next steps.
State investigates EasyKnock’s practices
In a May 20 order, the Michigan Attorney General ordered the company to cease what it claimed were illegal business practices, including misleading marketing and “oral misrepresentations by EasyKnock representatives” to induce consumers to engage in sale-leasebacks.
“Bad actors often take advantage of customers who are in vulnerable or even financial situations, charging hidden fees and confusing contracts,” Michigan Attorney General Dana Nessel said in a press release. “Homeowners often take advantage of customers who are in vulnerable or even poor financial situations. One should make sure to understand any financial agreement they are entering into before signing on the dotted line, and remember that if a deal seems too good to be true, it probably is.”
Michigan officials said they became aware of EasyKnock when the Massachusetts attorney general announced that EasyKnock had agreed to permanently cease its sale-leaseback operations as part of a settlement. EasyKnock’s sale and leaseback scheme has been described as an “unfair and deceptive equity skimming scheme”.
EasyKnock also agreed to pay $200,000, adjust tenants’ monthly rent amounts, return certain withheld funds to tenants and amend its lease to comply with Massachusetts law, Massachusetts officials said when announcing the settlement on Dec. 5.
The Connecticut Consumer Protection Commissioner issued a civil request to EasyKnock in February to investigate “business practices related to residential sale-leaseback agreements that may constitute unfair or deceptive acts or practices.”
In a statement to Inman, EasyKnock said the company welcomed the opportunity “to provide clarity and believe we can really play a role in educating people about the efficacy and use cases of products like Sell & Stay. We have an active campaign to demonstrate the many ways we transparently communicate and support our customers. Once people—including those in state agencies—have a clear understanding of our products and practices, they respond positively.
NPR Focus on Texas
NPR focused its investigation on Texas, calling it “property records show an early foothold in an important market for the company.”
In addition to analyzing property records, NPR also interviewed 20 homeowners who used EasyKnock to conduct sale-leaseback transactions.
“For some of them, it helped them get out of trouble,” NPR reports. “But for others, NPR found, it left them without a safety net and a roof over their heads. EasyKnock denies any wrongdoing and Call these examples “sizable outliers.”
One issue highlighted by NPR is that, unlike mortgage lenders, EasyKnock is not required to assess a homeowner’s ability to repay because its sale-leaseback transactions are not loans. EasyKnock customers who sued the company in Texas claimed that the transactions were technically loans and should be subject to the same regulations as mortgage lenders.
“This article confuses the difference between loan protection and sale-leaseback protection,” an EasyKnock spokesperson told Inman in a statement. “The transaction with us was not a loan; it was a loan.” First, it was a home sale; second, this It’s a lease agreement.
An EasyKnock spokesperson told Inman that the company “goes to great lengths to communicate and confirm that we are not a lender and that our products or products have never been marketed or sold as a ‘rent-to-own’ solution.”
EasyKnock said it partners with companies Piñata and FinLocker to help customers who want to improve their personal finances and improve their credit scores.
“We do spend a lot of time working with customers to make sure sale-leasebacks are right for them — we’re not in a rush,” EasyKnock told Inman. “We are more interested in seeing our clients succeed in the long term. Nothing makes us happier than the hundreds of our clients who have taken advantage of the time and empowerment we gave them to correct course financially. .
But NPR found examples of homeowners who were in financial trouble when they signed deeds on their homes, only to lose the deeds because they couldn’t keep up with rising rents or afford increased buyback costs.
“Of course, this is not the outcome we want anyone to see, but it’s the exception, not the rule,” EasyKnock told Inman. “While we hate to hear about it on the rare occasion that it happens, we cannot take responsibility for the housing market or life events that may impact people financially after they transact with us.”
EasyKnock told NPR that the company completes 4% of its evictions nationwide, and if the home appreciates in value when the company sells it to a third party, homeowners can recoup any appreciation. EasyKnock said appreciation for the average customer is 18%.
EasyKnock co-founder and CEO Jarred Kessler told NPR, “We can’t control the appreciation.” “Unfortunately [the goals of some clients who spoke to NPR] Not encountered. But it’s not because of EasyKnock. This is because of the market.
(Kessler is the recipient of the 2024 Inman Best of Finance Award, honoring “those pushing the envelope and reshaping the home buying space.”)
EasyKnock’s acquisition spree
Founded in 2016 and headquartered in New York City, EasyKnock closed a $3.5 million seed funding round in 2018, including $100 million in new debt financing from investors including Montage Ventures, Crestar Partners and Blumberg Capital.
This was followed by a $12 million Series A round in 2019, which also provided $203 million in debt financing, and a $20 million Series B round in the summer of 2020. Investors there raised $57.2 million in Series C funding, including Blumberg Capital, Gaingels, Moderne Ventures, QED Investors, Viola FinTech and Zillow co-founder Spencer Rascoff.
After an acquisition spree last spring, EasyKnock has expanded beyond sales and leasebacks and now says it aims to “provide consumers with alternative ways to buy and sell, finance new homes and leverage their equity.”
In just over a year, EasyKnock has acquired four companies to expand its reach and expand its product offerings:
- To launch into the national market, EasyKnock acquired power buyer Ribbon in May 2023.
- In September 2023, EasyKnock announced the acquisition of Onder, a home maintenance subscription platform, to create “the country’s first property maintenance platform for home owners.”
- In December, EasyKnock announced it had acquired Balance Homes, a home equity co-ownership solution that “provides homeowners with [with] The additional option of converting equity originally owned by them into cash to meet current needs.
- In May, EasyKnock announced the acquisition of HomePace, another home equity investment company.
HomePace founder and CEO Joe Cianciolo is now EasyKnock’s director of business development.
EasyKnock said in announcing the Balance Homes deal that CEO and co-founder Judd Schoenholtz will join EasyKnock as chief revenue officer. Schoenholtz gave up that title in May and is now an advisor to EasyKnock, according to his LinkedIn profile.
Balance Homes co-founder Aaron LaRue joined EasyKnock as chief technology officer and became an advisor to the company in May, “leading the team through the integration.” [and] Reorganizing team to improve product speed, platform reliability, and reduce expenses,” his LinkedIn profile reads.
According to LinkedIn information, Ribbon co-founder and CEO Shaival Shah left the company in June 2023 and currently serves as a technology consultant and investor, serving on the boards of video streaming platform YouNow and business subscription service Clarus Commerce.
Get Inman’s mortgage newsletter delivered straight to your inbox. A weekly digest of all the biggest news in mortgages and settlements around the world is published every Wednesday. Click here to subscribe.
Email Matt Carter
