A new-to-market company aims to level the playing field for Louisville homebuyers.
Ribbon, a New York-based homeownership company, will be expanding into Kentucky with its sights first set on Louisville. The company already operates in 14 other states, with Kentucky being its 15th market. A press release said the Bluegrass State is the eighth state its expanded to this year, and it intends to expand to half of the U.S. by the end of 2022.
In an interview, CEO and co-founder Shaival Shah said Ribbon collaborates with local real estate agents to provide homebuyers options that make for a more assured process. Specifically, Ribbon offers a program called RibbonCash, which allows homebuyers to make all-cash offers and guarantee a closing.
“Everyone right now is looking for one basic thing, which is certainty in the home transaction,” Shah said. “And so, when you utilize Ribbon as a consumer ... you provide certainty for both the home seller and the homebuyer that no matter what happens, the whole transaction will get completed.”
Founded in 2017 by Shah and Wei Gan, Ribbon is a power buyer, meaning it can either front cash to homebuyers or purchase a home on the buyer's behalf and sell it to them, typically within 30 to 180 days, financed with a traditional mortgage.
Cash offers are a growing trend among real estate startups and other establish companies. New York-based Orchard Technologies Inc. and Homeward Inc., both cash-offer companies, posted growth of more than 150% in 2020 and more than 300% in 2021, American City Business Journals previously reported.
There are a few reasons Ribbon chose Louisville for its next market. When entering a new market, the company looks at the difficulty consumers have when attempting to buy a home. Shah said in Louisville right now, there is not a lot of home inventory available and a lot of investor demand, creating a more competitive and less affordable market.
According to the Greater Louisville Association of Realtors, the median home sale price in May was $260,000, up 12.8% from $230,500 in May 2021. The average home sale price was $299,857, up 10.16% from $272,212 in May 2021. Mortgage rates have increased, too, with the average interest rate for a 30-year mortgage currently at 5.65%.
“Why do consumers, time and time again, end up in an unlevel playing field?” Shah said. “It’s because people who simply have those cash offers are high-net-worth individuals or their investors, and those are very, very attractive offers to the home seller. And everyday buyers are bidding with a mortgage, so we're able to be able to automatically upgrade a family into an all-cash offer that gives them and the seller certainty for closing, and that's what gives them a leg up.”
Another reason relates to where homebuyers are locating. Shah said the company follows where consumers are migrating throughout the country, with Louisville being one of those places. With even more millennial homebuyers entering the market, he said there’s going to be shifts in demand and methods of buying a home.
“We believe millennial homebuyers in five years are going to want to purchase homes in a very different way than their parents purchased their home,” Shah said.
Shah declined to share specific financial figures, but noted the company has access to billions of dollars of capital to help fund the cash offers. The capital comes from investors who support Ribbon’s mission of making homeownership more achievable.
In September 2021, the company raised a $150 million Series C funding round with the intent to grow into more states. Since 2017, the company has raised a total of $650 million in capital, the Charlotte Business Journal reports.
According to Ribbon's website, it charges a small transaction fee for homebuyers to use the cash-offer programs.
Ribbon is partnering with Finish Line Realty locally. Scott Hack, owner and broker at Finish Line Realty with offices in Pewee Valley, said his agents will be able to utilize Ribbon as another tool when trying to complete a home transaction.
“If you view all problems as nails, you only need a hammer as your tool,” Hack said. “But that's definitely not the case for the market. There are different nuances, there's different situations, and you need different tools in your toolbox. So, this is definitely going to be something that we are going to have available to us to use.”
Finish Line Realty has nine agents, all of which are being trained to use Ribbon’s services. Hack said Ribbon is not going to be the right fit for every buyer, in which case the agents can continue using traditional mortgage-backed offers.
But for buyers that are competing with higher price points, Ribbon will allow Finish Line agents to convert the buyers mortgage-backed offer into a cash-backed offer, becoming appealing to the seller and giving them a higher chance of having their offers selected.
In the local markets, Ribbon forms a business development team to work with different brokerage firms. Sarah Horn, the company's local regional business development manager, said when Ribbon enters a market, they partner with local real estate firms like Finish Line as to not disrupt the current real estate ecosystem in place.
Horn is working to spread the word about Ribbon and its services to the Louisville real estate community. She said the company is looking to expand into even more Kentucky metropolitan areas, like Lexington and Bowling Green, and wants to continue growing in more states.
"For fatigued buyers who may have written off home shopping, this might be another way for them to engage their agent again," Horn said.
