Buying a home is incredibly hard right now. One startup aims to help first-time buyers take on investors by enabling them to make all-cash offers.
- Owning a home in the US has become incredibly difficult for first-time buyers.
- Ribbon, a startup founded by an ex-Twitter engineer, aims to help millions buy their own properties.
The housing market has made for increasingly grim viewing for anyone trying to buy in the US, particularly millennial and Gen Z first-time buyers.
House prices in the US surged by almost 19% last year, according to the S&P CoreLogic Case-Shiller US National Home Price Index, placing the already difficult-to-achieve goal of owning a home out of the reach of even more would-be buyers. The volume of homes up for sale is near record lows, while interest-rate hikes continue to put upward pressure on
It has created an environment that has emboldened those with cash, particularly investors. Cash buyers made up 28% of all purchases in March, according to figures from the National Association of Realtors, a 5 percentage-point jump over the same month last year.
Ribbon, headquartered in New York, is one of a collection of startups hoping to halt falling affordability and help normal homeowners compete with investors. The startup has developed a "power buyer" model that enables bidders to make all-cash offers.
"The reason why cash offers are so powerful is because they are very certain to the seller," Wei Gan, Ribbon's cofounder and a former Twitter engineer, told Insider.
"If you price everyone out of ownership in the lower end of the market, the demand for rental goes up and makes it even more lucrative to be a real-estate investor," Gan said.
Gan, who acts as Ribbon's chief technology officer, said the startup was "built to fight that" and that he hoped the promise of cash offers would be enough for buyers to gain an advantage over established investors.
Ribbon charges a commission of between 1% and 3% to help homebuyers secure the property they want. Under its "boost" program, the company backs a buyer's offer with cash to make it stronger. Alternatively, through "reserve," the company will purchase the home on the buyer's behalf, let them move in immediately and pay rent, and then sell the home back to them at the same price.
Buyers secure preapproval either through Ribbon or their own lender, with Ribbon acting as an underwriter, using its system to both appraise a home and identify the lending eligibility of the buyer.
The buyer is able to rent for a period of up to three months once the sale is secured, with the properties available for RibbonCash offers ranging from $150,000 to $1 million and applying to homes built after 1960.
It diverges from the typical route of relying on bank lending to push through a sale, which Ribbon says drags out the buying process and leaves the buyer at risk of losing the home.
Gan joined Twitter after TellApart, the ad-targeting company he worked for, was acquired by the social-media giant in a $530 million deal in 2015. He said he used the money he earned from the takeover to buy a home with cash, the ease of which was a factor in inspiring the founding of Ribbon alongside his cofounder, Shaival Shah.
He hopes to make Ribbon a multibillion-dollar company and join the ranks of D.R. Horton, Zillow, and Opendoor in the real-estate-tech sector.
"Residential real estate is this huge asset class in the US, so why isn't there an Amazon, or even an Airbnb-sized $100 billion company?" Gan said.
"I think a lot of these companies in this space, including us, are trying to build towards that," he added. "And we're certainly a lot smaller than those companies right now, but I would hazard to guess that we're a lot faster-growing."
Investors have increasingly viewed America's booming real-estate market as a good hedge against inflation. In January, one-third of all US homes for sale were bought by investors, the highest percentage in at least a decade, according to John Burns, a housing expert.
The startup operates in 11 states, including Texas, Georgia, and Virginia, and plans to more than double its footprint to 25 by the end of the year.
Frances Bryant, Ribbon's director of financial products and programs, said the shortage of supply meant the company had already seen multiple customers competing for the same home on a nearly daily basis.
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