Homebuying Startup Aims to Help Homebuyers Take on Investors

  • Owning a home in the United States has become incredibly difficult for first-time buyers.
  • Ribbon, a startup founded by a former Twitter engineer, aims to help millions of people buy their own properties.
  • The company’s “power buyer” model allows homeowners to make cash offers for their homes.

The housing market is looking increasingly bleak for anyone trying to buy in the United States, especially first-time Millennials and Gen Z buyers.

U.S. home prices jumped nearly 19% last year, according to the S&P CoreLogic Case-Shiller US National Home Price Index, placing the already elusive goal of owning a home beyond the reach of even more potential buyers. The volume of homes for sale is approaching record lows, while rising interest rates continue to put upward pressure on mortgage rates.

He created an environment that emboldened those with money, especially investors. Cash buyers accounted for 28% of all purchases in March, according to figures from the National Association of Realtors, a jump of 5 percentage points from the same month last year.

Ribbon, headquartered in New York, is among a group of startups hoping to stem the decline in affordability and help normal homeowners compete with investors. The startup has developed a “power buyer” model that allows bidders to bid all in cash.

“The reason cash offers are so powerful is that they are very certain for the seller,” Wei Gan, co-founder of Ribbon and former Twitter engineer, told Insider.

“If you price property for everyone at the bottom of the market, rental demand increases and makes it even more lucrative to be a real estate investor,” Gan said.

Gan, who serves as Ribbon’s chief technology officer, said the startup was “built to fight this” and that he hoped the promise of cash offers would be enough for buyers to gain an edge over established investors.

Ribbon charges a commission of between 1% and 3% to help buyers secure the property they want. Under its “boost” program, the company backs a buyer’s offer with money to make it stronger. Alternatively, through the “reserve”, the company will buy the house on behalf of the buyer, let them move in immediately and pay the rent, then resell the house to them for the same price.

Buyers get pre-approved either through Ribbon or through their own lender, with Ribbon acting as an underwriter, using its system to both appraise a home and identify the buyer’s loan eligibility.

The buyer can rent for up to three months once the sale is secured, with properties available for RibbonCash deals ranging from $150,000 to $1 million and applying to homes built after 1960.

This is a departure from the usual route of relying on bank loans to complete a sale, which Ribbon says prolongs 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 that he had won through the takeover to buy a house with cash, the ease of which was a factor that inspired the founding of Ribbon alongside its co-founder, Shaival Shah.

He hopes to grow Ribbon into a multi-billion dollar company and join the ranks of DR Horton, Zillow and Opendoor in the real estate and technology industry.

“Residential real estate is this huge asset class in the United States, so why isn’t there Amazon, or even a $100 billion company the size of Airbnb?” Gan said.

“I think a lot of these companies in this space, including us, are trying to build in this direction,” he added. “And we’re certainly a lot smaller than those companies right now, but I would guess we’re growing a lot faster.”

Investors increasingly see the boom in the US housing market as a good hedge against inflation. In January, a third of all homes for sale in the United States 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 supply shortage meant the company had already seen multiple customers vying for the same home almost daily.

Previous Why Twitter is an easy target for outsiders like Elon Musk eager to change
Next MSU Board Approves Tuition, Fee Increases for '22-'23 Academic YearOzark Radio News