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Fast-growing sale-leaseback platform EasyKnock is facing consumer lawsuits in Texas, Maryland, South Carolina, Pennsylvania and Ohio — and enforcement actions by attorneys general in Michigan and Massachusetts — over its business practices, NPR reports.
In a lengthy investigative piece, NPR says it analyzed 423 properties EasyKnock purchased in Texas and found that the deals “cost some people tens of thousands of dollars in equity and that the vast majority of people do not buy their houses back.”
EasyKnock told NPR the civil lawsuits are “meritless” and that it’s cooperating with attorneys general looking into its business practices. If homeowners lose money on sale-leasebacks, it’s because of personal circumstances or the local housing market, the company said.
In a statement to Inman, a spokesperson for the company said, “Several components of the original story and follow-up questions indicated a strong leaning against sale-leasebacks; or at the very least, a limited understanding of how they work. The story also did not explore the macroeconomic conditions, such as prolonged high interest rates, and the role of the housing market which is obviously out of our control.”
NPR’s finding that most people don’t buy their houses back is misleading, EasyKnock told Inman, because “the majority of people who have done transactions with us have not reached a decision point about exercising [that option] … The vast majority are still renters and have not yet shared their next move.”
State investigations into EasyKnock’s practices
In a May 20 cease-and-desist letter, Michigan’s attorney general ordered the company to halt what it claimed were unlawful business practices, including misleading marketing and “oral misrepresentations made by EasyKnock representatives” to induce consumers to enter into sale-leasebacks.
“Bad actors often take advantage of customers in vulnerable or even dire financial situations, with hidden fees and confusing contracts,” Michigan Attorney General Dana Nessel said in a press release. “Homeowners should be sure they understand any financial agreement they are entering before they sign 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 operation of its sale-leaseback business as part of a settlement agreement. EasyKnock’s sale-leaseback program was described as an ‘unfair and deceptive equity-skimming scheme.’”
In announcing the settlement on Dec. 5, Massachusetts officials said EasyKnock had also agreed to pay $200,000, adjust tenants’ monthly rent amounts, return certain withheld funds to tenants, and revise its leases to comply with Massachusetts law.
The Connecticut Commissioner of Consumer Protection issued a civil investigative demand to EasyKnock in February in connection with a probe “into business practices regarding residential sale-leaseback agreements which may constitute unfair or deceptive acts or practices.”
In its statement to Inman, EasyKnock said the company welcomes the opportunity “to provide clarity and believe that we do have a role to play 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 are transparently communicating and supporting our customers. Once people — including those at state agencies — have a clear understanding of our products and practices, they respond positively.”
NPR’s focus on Texas
NPR focused its investigation on Texas, calling it “an early foothold that property records indicate is a substantial market for the company.”
In addition to analyzing property records, NPR spoke to 20 homeowners who engaged in sale-leasebacks with EasyKnock.
“For some of those people, it helped them out of a tough spot,” NPR reported. “But for others, NPR found that it cost them their safety net and the roof over their heads. EasyKnock denies any wrongdoing and calls these examples ‘considerable outliers.'”
One issue highlighted by NPR is that, unlike mortgage lenders, EasyKnock is not required to evaluate a homeowner’s ability to repay because its sale-leaseback deals are not loans. EasyKnock clients who have sued the company in Texas claim the transactions are technically loans and that it should be subject to the same regulations as mortgage lenders.
“The article conflated the differences in protections for loans vs those of a sale-leaseback,” an EasyKnock spokesperson told Inman in a statement. “The transaction with us is not a loan; it is first a home sale; second, it is a rental agreement.”
The EasyKnock spokesperson told Inman that the company goes “to great lengths to convey and confirm that we are not a lender and in no way have our products or offerings ever been marketed or sold as a ‘lease-to-own’ solution.”
EasyKnock said it’s partnered with two companies, Piñata and FinLocker, to help customers who want to improve their personal finances and boost their credit score.
“We do spend a great deal of time working with our customers to ensure that a sale-leaseback is suited to them – there’s no rush on our end,” EasyKnock told Inman. “We’re much more interested in seeing our customers succeed in the long run. Hundreds of our customers have used the time and empowerment we gave them to financially course-correct, and nothing pleases us more.”
But NPR found examples of homeowners who were in financial distress when they signed over the deeds to their homes and lost them when they were unable to keep up with rising rents or afford the increased repurchase cost.
“Of course, that is not the outcome we want for anyone, but it is the exception, not the rule,” EasyKnock told Inman. “And while we hate to hear it in the rare cases it does occur, we cannot assume responsibility for the housing market nor the life events that may impact people financially after they have transacted with us.”
EasyKnock told NPR that its rate of completed evictions nationwide is 4 percent and that homeowners recoup any appreciation if a house goes up in value by the time the company sells to a third party. EasyKnock says the average customer sees 18 percent appreciation.
“We have no control over appreciation,” EasyKnock co-founder and CEO Jarred Kessler told NPR. “It’s unfortunate that [the goals of some clients who spoke to NPR] were not met. But that’s not because of EasyKnock. That’s because of the market.”
(Kessler is the recipient of an Inman Best of Finance Award for 2024, honoring “those pushing the envelope and reshaping the home buying space.”)
EasyKnock’s acquisition spree
Launched in 2016 and based in New York City, EasyKnock closed a $3.5 million seed funding round in 2018 that included $100 million in new debt funding from investors including Montage Ventures, Crestar Partners and Blumberg Capital.
That was followed by a $12 million Series A in 2019 that also provided $203 million in debt funding, and a $20 million Series B in the summer of 2020. Most recently, EasyKnock announced a $57.2 million Series C funding round from new and existing investors, including Blumberg Capital, Gaingels, Moderne Ventures, QED Investors, Viola FinTech and Zillow co-founder Spencer Rascoff.
After embarking on a buying spree last spring, EasyKnock has expanded its business beyond sale-leasebacks and now says its aim is to “provide consumers alternative ways to buy and sell, finance new homes, and utilize their equity.
In just over a year, EasyKnock has acquired four companies to grow its reach and expand its offerings:
- In a bid to launch a national marketplace, EasyKnock acquired power buyer Ribbon in May 2023.
- In September 2023, EasyKnock announced it had acquired home maintenance subscription platform Onder, to establish “the first nationwide property maintenance platform for homeowners.”
- In December, EasyKnock announced it had acquired home equity co-ownership solution Balance Homes, “providing homeowners [with] additional options to convert the equity that is rightfully theirs into cash for their current needs.”
- In May, EasyKnock announced the acquisition another home equity investment firm, HomePace.
HomePace founder and CEO Joe Cianciolo is now EasyKnock’s head of business development.
In announcing the Balance Homes deal, EasyKnock said the company’s CEO and co-founder Judd Schoenholtz would be joining EasyKnock as chief revenue officer. According to his LinkedIn profile, Schoenholtz relinquished that title in May and is now an advisor to EasyKnock.
Balance Homes co-founder Aaron LaRue, who joined EasyKnock as chief technology officer, also became an adviser to the company in May, having “led the team through the integration [and] restructuring the team to improve product velocity, platform reliability, and reduce expenses,” his LinkedIn profile states.
Ribbon co-founder and CEO Shaival Shah left the company in June 2023 and is currently a technology adviser and investor, serving on the boards of video streaming platform YouNow and commerce subscription service Clarus Commerce, according to his LinkedIn profile.
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