In 2017 entrepreneurs Jian Wei Gan, Shaival Shah acted on a shared vision and created a truly unique startup called Ribbon. Today, their idea to make homeownership more achievable is a bristling success. This week RealtyBiz talked with Shaival Shah about the company’s success, the pandemic, and the future of one of real estate’s most successful innovations.
For those unfamiliar, the way Ribbon works is by working with Realtors in local markets to give their clients the freedom to buy the home they want immediately and allowing them the flexibility to sell their existing home for the best possible price. The company works with homebuyers and their agents to provide sellers a guaranteed sale through an all-cash offer regardless of where the buyer is in the mortgage process. This not only streamlines the whole buy/sell process, but it also gives buyers a cushion to secure long-term financing. Ribbon basically leases the homes to the buyers, until such time as their loans come through. The service lets buyers purchase their new home first and allows them to gain valuable time to sell their current home at the best price.
Phil Butler: Your company's stated mission is to level the property ownership playing field for all potential homebuyers. Ribbon does this by standing in for buyers hampered by the current borrower system. Can you elaborate a little on how you arrived at filling this niche?
Shaival Shah: Over the past 10 years, over $1 Trillion of US Housing has been purchased by real estate investors, turning housing supply into long-term rentals. In doing so, this puts extreme pressure on everyday families who are looking to earn homeownership by competing with everyday consumers and reducing the supply of homes in our local communities. Investors are able to out-compete consumers because they make all-cash, no contingency offers. Our mission is to level the playing field and to ensure consumers are given the opportunity to win the home of their dreams. We do so by up-leveling mortgage-eligible consumers into a novel, new all-cash consumer product with a guaranteed close to provide the strongest offer in real estate. We believe in building the middle class and fighting the inequities in housing.
Phil Butler: Several times in my own home-buying experiences, I've looked for "lease options" on properties. Is it fair to say Ribbon is the latest innovation in lease option buying?
Shaival Shah: Ribbon is a short-term program that allows consumers to lease their new homes and then secure their mortgage. When securing their mortgage, Ribbon transfers the home to them at the original purchase price. This has proven to be wildly successful for first-time homeowners and existing homeowners looking to buy their new homes while they sell their current homes.
Phil Butler: With this in mind, since living in Europe we've seen a great need for an innovative service such as Ribbon. Do you have plans for expanding to other markets?
Shaival Shah: We plan to build a national offering over the next several years. And with success and scale, we do intend to build a global footprint to back and support everyday families with our novel financial and software offerings.
Phil Butler: Late last year, Ribbon made "Red Herring’s Top 100 North America 2020" list for innovation in the industry. This is an interesting distinction, one worth expanding upon. Can you tell our readers how your company can "one-up" past differentiations?
Shaival Shah: In the past, most of the innovation in housing has focused on home discovery. Zillow, Trulia, and Realtor.com provided a great consumer service to put more control in the hands of the consumer. However, the process of buying and selling your home, the transaction itself, has never seen any innovation. Our belief is to level up the experience with an open platform that allows all constituents in the transaction to participate fairly and equally. This creates the first-ever market network for housing and a resilient way to simplify the home buying and selling process while creating powerful financial offerings to insert certainty for peace of mind.
Ribbon has so far received $555 million in funding from some of investing’s most successful venture sources including $300 million from Goldman Sachs. The value of these investments is based on the capability Ribbon has to deliver a profit margin. 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.
The rub is for the appraisals from Ribbon to pan out whether the buyer ultimately gets approval or not. The margin, or profit, comes from the property value if everything goes south. The company has secured billions in capital to guarantee the necessary transactions, which shows the process genuinely works. My take is, the sky is the limit for Ribbon and for the market the company serves.