There’s a new real estate startup that is buying homes directly from homeowners, but unlike direct buyers like Opendoor and Offerpad and real estate giants like Zillow and Redfin, which focus on buying homes from sellers, Ribbon is buying homes for buyers.
Ribbon, which is currently operating in the Carolinas, offers a novel concept. The company works with homebuyers and their real estate agents to provide home sellers with a guaranteed sale, providing sellers with an all-cash offer regardless of where the buyer is in the mortgage process.
Basically, if a homebuyer can’t close on their mortgage in time, instead of losing out on the house of their dreams, Ribbon will buy and reserve the home on their behalf. The buyer then rents the home from Ribbon until they get their financing in order.
The program offers appeal for both sides of the deal. Sellers get a guaranteed cash offer and buyers don’t have to worry about losing the house they want because their funding is slowed for whatever reason.
The company is still in its early stages, operating only in a few markets in North and South Carolina, but it has big plans for growth.
And now, the company has some serious financial backing to power that growth.
Ribbon announced Thursday that it raised $225 million in a combination of debt and equity financing. According to the company, it plans to use the money to expand into 10 new markets by the end of 2019 and more markets after that.
The company launched in Charlotte, North Carolina, and has since expanded into Cary and Asheville, North Carolina and Fort Mill and Indian Land, South Carolina.
The company said that it is “focused on markets where homebuyers are having the hardest time securing their new homes and face stiff local competition from investors and corporate buyers.”
The company claims that its process gives homebuyers a greater than a 90% chance of having their offer accepted, while also saving thousands of dollars in cash discounts and receiving a 100% on-time closing.
“Buying a home is a milestone to be celebrated and enjoyed. However, if you are a first-time homebuyer or you need to sell your existing home prior to buying a new home, the current homebuying process is an intimidating and stressful experience,” Ribbon CEO Shaival Shah said.
“We solve this problem by buying and reserving a home for a family, so they can secure their mortgage in peace without the risk of losing the home they love,” Shah continued. “For the first time, we are bringing simplicity to the real estate transaction by absorbing all risk, so buyers, sellers and Realtors can focus on the joy of the home buying and selling experience.”
And Ribbon is free to homebuyers. The company makes its money from sellers, who pay them a 1.95% fee for the certainty that Ribbon can provide with its all-cash offers, either directly from the buyer or on their behalf.
Ribbon also offers “personalized home valuations,” its own form of an appraisal.
“Ribbon's same-day, free professional home valuations provide buyers with an upfront understanding of the true value of a home, removes appraisal risk, increases their ability to win and illustrates the predicted amount of cash savings for buying with Ribbon,” the company states. “Unlike other valuation tools, Ribbon backs their valuations by committing to buy the home up to the Ribbon Max Value.”
According to the company, which does not list its management or executives on its website, the company is led by “top technology and real estate professionals from major startups, such as LendingClub, Airbnb, Spotify, Twitter, Blue Apron, Invitation Homes and American Homes for Rent.”
In this latest round of funding, the company received money from existing investors Bain Capital Ventures, Greylock, NFX, and NYCA, but the company did not provide any more financial details beyond that.
The company did say that it has secured capital to enable more than $2 billion in transactions this year.