‘Cash offer’ start-ups help pressed buyers

After months of searching, Lenny Rowell and his family were no closer to finding a home in Charlotte in the US state of North Carolina.

Houses in the city, one of the most competitive markets in the country, were selling so fast and those his family really liked were being quickly snatched up and bought with cash.

To stay in the running, his Charlotte-based property agent, Nelvia Bullock, suggested Rowell consider doing an all-cash deal, pointing him to a third-party entity called Ribbon, a Charlotteand New York City-based start-up “power buyer” that helps qualified buyers get their new house by providing all-cash offers to sellers.

Though initially sceptical, Rowell secured an all-cash bridging loan from Ribbon and paid a 1 per cent transaction fee in order to “jump to the front of the line”, he said.

As a result, his family was able to buy a 3,400 sq ft, five-bedroom and four-bathroom home in a suburb about 40 minutes north of Charlotte that will give plenty of space for their four children who range in ages from one to nine.

“I never did anything like this before, but this was a decision driven by the market and time,” Rowell said about borrowing from Ribbon. “I took a chance, and it all paid off.”

The rise in all-cash home purhcases comes during a continuing sellers’ market that exploded during the pandemic.

Coming in with all cash may be the best way to bypass or win a bidding war, some experts say, while for some buyers, initially skipping a more traditional mortgage and borrowing from “power buyers” such as Ribbon, Orchard, Flyhomes and Better.com has proven vital during a time when there is an acute shortage of homes for sale.

Currently, all-cash purchases comprise 33 per cent of US home sales, compared to about 19 per cent two years ago, according to the National Association of Realtors.

Shaivai Shah said he cofounded Ribbon with Wei Gan in 2017 to help level the playing field for the average homebuyer and also in part because he remembered his parents having difficulties becoming homeowners after immigrating to the United States from India in the 1960s.

“For buyers, speed is of the essence,” Shah said. “When a home comes on the market, it can be gone within 24 to 48 hours. We’re here to help.”

With more than US$650 million in funding since its inception, including receiving a US$150 million infusion from investors last autumn, Ribbon assisted homebuyers with cash offers ranging from US$100,000 to US$1 million, he said.

It partners with about 20,000 property agents and more than 100 lending partners in states across the South and plans to expand to the northeast, the Midwest and the west coast.

Shah said Ribbon was not a mortgage company, but rather helped homebuyers from all economic backgrounds compete with investors who threw cash at sellers wanting a quick sale.