Thursday, June 13, 2024

Ribbon suspends cash offer service, working on new tools for spring

Must read

New markets require new approaches and tactics. Experts and industry leaders take the stage at Inman Connect New York in January to help navigate the market shift — and prepare for the next one. Meet the moment and join us. Register here.

Power buyer Ribbon has suspended its cash offer service just one month after rolling it out in three new markets, while the company works on a new “suite of Ribbon tools” for the spring 2023 homebuying season.

New York-based Ribbon laid off 136 employees, about one-third of the company’s workforce, in July. But just a month later, Ribbon was back in expansion mode, bringing its cash offer solution to Illinois and Michigan. Last month Ribbon expanded its presence in Arkansas, Colorado and Illinois, states that it entered this year.

Sources outside of the company told Inman on Thursday that Ribbon had paused its cash offer service, with one source saying Ribbon had lost access to a credit facility and could no longer fund home purchases.

Ribbon spokesperson Sean Piazza said in emails Friday that the Ribbon’s credit facility was not shut off, but the company had “temporarily paused new RibbonCash purchases,” to enable Ribbon to “focus fully on current customers’ trajectory toward repurchase, but also plan new products for our partners’ market needs by 2023’s buying season.”

“Overall, we hope that this will equate to a suite of Ribbon tools that fortify the industry in this new market and empower the everyday agent and loan officer,” Piazza wrote. “This is similar to what we did in 2020 [raised Ribbon’s fee by 50 percent to limit demand], to support the customer we had already enabled towards homeownership, and in 2021 we came out with new products to support homebuyers in the post-pandemic market dislocation.”

A number of iBuyers have struggled in recent months, as rising interest rates and peaking home prices turn many housing markets from seller’s markets to buyer’s markets. Redfin announced Wednesday that it’s cutting 13 percent of its workforce and shuttering its iBuying program, Redfin Now. Zillow announced last year that it was exiting the iBuying business, and recently sold the last of the homes it had purchased through the Zillow Offers program.

Founded in 2017, Ribbon is active in 17 states, partnering with real estate agents, lenders and homebuilders to help mortgage-eligible buyers make contingency-free offers that are guaranteed to close on time. Although Ribbon is not an iBuyer, it has purchased homes on behalf of RibbonCash clients who use its “RibbonReserve” program if they’re unable to close a deal with their own financing, charging 2 percent to 3.25 percent of the sales price for the service.

“We combine a digital offer workflow software (called RibbonHub), powerful all-cash home financing programs (called RibbonCash), and white glove customer service, to offer solutions for every homebuyer and homeseller,” Ribbon says on its website.

If Ribbon no longer has the ability to back up clients’ offers by stepping in and buying homes on their behalf, it remains to be seen whether the company’s partners and consumers will value its other services.

Ribbon cofounders Shaival Shah and Wei Gan were not available to speak to Inman, but Piazza responded in writing to specific questions raised by the pause in RibbonCash purchases. Those questions included what Ribbon’s value proposition is to buyers and sellers without RibbonCash, how many homes Ribbon currently owns, and whether more layoffs are planned.

Piazza said while RibbonCash is paused, the company’s focus “is supporting agents and lenders as they adapt to the changing market. That includes solving problems around home affordability, with tools that could extend beyond RibbonCash and the Power Buyer model.”

While Ribbon does not discuss transaction volume or inventory, Piazza said most of Ribbon’s customers “use Ribbon Boost to purchase the home without Ribbon. For those that use Ribbon Reserve, we purchase the home first until they’re able to secure their mortgage. Ribbon’s inventory of homes consists of these Ribbon Reserve homes we’re reserving for our customers. Our customers typically repurchase within a few months of moving in. As a result our inventory cycles out upon those repurchases.”

Piazza said the “vast majority” of buyers who use the Ribbon Reserve program follow through and repurchase the home from Ribbon, for the price that Ribbon paid.

“In the rare occasions the repurchase does not happen, Ribbon like any other home seller is subject to fluctuations in market prices,” Piazza said. “Our model reduces our exposure to market prices because the vast majority of our customers either purchase the home directly, or repurchase the home at the original price.”

Piazza declined to say whether Ribbon will lay off more workers.

“Internal decisions, like hiring decisions or reductions in force, are always shared first with employees out of respect for them,” he said.

One real estate broker who just partnered with Ribbon last month told Inman that while none of her agents have had the opportunity to use Ribbon yet, she’s “absolutely” willing to wait for the company to adjust its offerings.

Kristyn Cooley

Kristyn Cooley, managing broker at Crye-Leike in Hot Springs, Arkansas, said that because Hot Springs is not a major metro market, she had to get on a waiting list before her brokerage was approved as a Ribbon partner.

“I know in a lot of the other markets [where Ribbon is active], many of the managers had a great experience,” Cooley told Inman. “I wish I’d had the opportunity to work with them.”

Because Hot Springs is a second home and vacation destination market, Cooley said she’d expected Ribbon would be a valuable tool.

“Our agents will continue to use other Ribbon products as they get familiar with them,” Cooley said.

Ribbon also has multi-state partnerships with lenders Amerifirst Home Mortgage and Fairway Independent Mortgage Corp. A spokesperson for Fairway said the company had no comment. Amerifirst did not respond to requests for comment.

A little over a year ago, Ribbon announced a $150 million Series C raise that the company said would facilitate more than $10 billion in home transactions annually.

The September 2021 funding round, which included $75 million in equity funding, was led by Greenspring Associates with participation from existing investors Greylock, Bain Capital Ventures, NFX, Nyca, Thomvest and Jake Seid. New strategic investors included First American Financial, Waterfall Asset Management, TriplePoint Capital, Spencer Rascoff’s 75 & Sunny Ventures, Gary Beasley, Gregor Watson, and Guy Gal.

Just one week after Ribbon announced the Series C funding round, lead investor Greenspring Associates was acquired by StepStone Group Inc., a publicly traded global private markets investment firm with $135 billion in assets under management as of Sept. 30. A spokesperson for StepStone said the firm had no comment on recent developments at Ribbon.

Editor’s note: This story was updated on Nov. 11 to include additional comments from Ribbon.

Get Inman’s Extra Credit Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.

Email Matt Carter

More articles

Latest article