Ribbon helps home buyers finance a purchase

 In December 2018

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When Ribbon co-founder and CEO Shaival Shah’s parents immigrated to the U.S. from India in the 1960s, they had no idea how much they would struggle to secure a home.

The Federal Housing Administration rebuffed many minority families in that era and declined to insure a mortgage for the Shahs. Luckily, his father’s co-workers recognized the family’s predicament and loaned them cash to buy their first home. The family patriarch took this to heart and started social programs to assist others trying to buy their first homes.

This mentality stuck with Shah, who sees a similar purchasing problem happening today. In October, there was only a 2.5-month inventory of homes in the Charlotte region, down 57% from 2013, according to the Charlotte Regional Realtor Association. “There’s no supply,” Shah says. He blames the problem, in part, on so many investors acquiring homes that are then leased. People wanting to own property have less choice and pay higher prices. “It’s this really vicious cycle. [Ribbon’s] mandate and responsibility to the community is to break that cycle.”

Shah founded Ribbon with former Twitter software engineer Jian Wei Gan in May and raised $225 million in October from investors including Greylock and Bain Capital Ventures. It’s among the state’s biggest fundraisers this year.

If a customer finds a home but needs extra time to arrange financing, Ribbon steps in and pays cash for the home. In some cases, the closing transaction occurs after clients move into the new home.

The approach hinges on Ribbon’s proprietary software that studies potential buyers’ credit records to ensure they are likely to receive mortgage financing. Buyers don’t pay a fee, while sellers who accept Ribbon’s offer pay a 1.95% fee at closing in addition to traditional brokerage costs. Sellers are more likely to lower a home price when presented with an all-cash offer, says Shah, who is based in New York.

Ribbon also improves a buyers’ chances of winning a bidding war, Shah says. “We literally upgrade you to an all-cash guaranteed close that moves you from the bottom of the pile for a seller that has [competing] offers to the top of the pile,” he says.

A mobile app allows interested real-estate agents or potential buyers to add their name and home of interest, which kicks off Ribbon’s work. The company underwrites the home and the buyer in a matter of hours — or less.

“Our fastest turn was in 26 minutes,” Shah says. “We use a lot of data science and algorithms to move at that kind of speed.”

Transactions have tripled quarter over quarter since Ribbon launched in May, the company says. Ribbon has 20 employees, with plans to expand to 250 by the end of 2019.

The company has a presence in the Charlotte, Cary and Asheville areas and expects to enter at least 10 new markets next year.

“Consumers want to buy, but they can’t buy. … If we start turning into a renter nation, we are going to be destroying the fabric of the middle class,” Shah says. “We are putting the power back into the hands of the people.”

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