Startup Turns Buyer Bids Into All-Cash Offers

May 15, 2018

In a competitive housing market, some buyers are increasingly losing out to those who are willing make an all-cash offer to close the deal. All-cash offers are attractive to sellers since they tend to close quickly and aren’t contingent on any potential hang-ups from a buyer’s financing. Now, a new startup is making headlines with an offer to turn nearly any buyer’s offer into an all-cash one to better compete. 

The company, Ribbon, is launching in Charlotte, N.C., and offers buyers and sellers cash backing in case their mortgage falls through. The firm is not a lender, however. Instead, it underwrites potential buyers—like a lender would do—and then uses its own data system to predict whether a buyer will be eligible for a mortgage and the amount. Ribbon charges the buyer 1.95 percent of the purchase price if the mortgage comes through and the sale closes. 

“We’re introducing the first-ever platform that allows buyers, sellers, and [real estate professionals] to participate together to guarantee a home transaction,” Shaival Shah, founder and CEO of Ribbon, told CNBC. “Buyers can now compete effectively on the open market against institutional investors, Wall Street capital, and very wealthy individuals.” 

Ribbon will only back single-family homes, townhomes, or condos priced between $100,000 and $600,000. 

In cases where the home is not appraising high enough, Ribbon will purchase the home and allow the client to rent it—up to a year—until they are able to buy it. Ribbon will sell the home to the client at the same price the firm purchased it. If the client chooses to not buy but just rent, Ribbon charges 2.95 percent of the original purchase price. 

Ribbon is partnering with more than 100 real estate professionals who are piloting its program. 

“We believe that the [real estate professional] has a part to play with local knowledge and experience with the market,” Yuriy Vaynshteyn, a real estate professional at Engel & Volkers Charlotte who is working with Ribbon, told CNBC. “It’s an advantage to our clients because theyre the ones being squeezed out of the market by ‘ibuyers’—Zillow, Open Door—and large companies that are basically backed by venture capital money.”

Ribbon says it differs because it does not aim to buy the home for a buyer, but wants to back them with cash. In its first month before officially launching, Ribbon execs say so far they have $15 million of home transactions in the pipeline and have purchased three homes so far. 

Ribbon is available to buyers in Charlotte, but the company expects to extend into other markets in the future.

Source: “This Start-Up Aims to Help Almost Any Homebuyer Make an All-Cash Bid,” CNBC (May 14, 2018)