Money is king, especially for Florida home buyers.
The number of homes purchased without a mortgage has skyrocketed, according to Florida Realtors. From May 2020 to this year, the number of homes purchased entirely in cash increased by 150%. The booming housing market has put home buyers in need of a loan at a disadvantage.
Ribbon, a real estate start-up, wants to give buyers a head start against cash offers. The company is expanding in Florida this month.
“Florida right now, and Tampa, is one of the hottest real estate markets in the country,” said Shaival Shah, co-founder of Ribbon. “And there are several offers from many different homebuyers on any given day.”
The company will place a cash offer on a house in the buyer’s place. If the offer is accepted, Ribbon will buy the house and then sell it to the buyer for the same price after they finish getting a loan.
If a buyer cannot get financing by the time the sale closes, Ribbon will lease the home to the buyer for up to 180 days until they can pay, Shah said.
“Florida is one of our most demanded markets that we have,” he said, adding that the company has received numerous inquiries from consumers and real estate agents in Florida since launching in 2017.
Cash buyers made up 37% of all home buyers in Tampa in the first quarter of the year, according to data from real estate brokerage firm Redfin. These homebuyers, typically investors or high net worth buyers looking for a second home, are better able to afford a premium listing price, said Kendall Bonner, owner of RE / MAX Capital Realty in Tampa.
“It’s disappointing and frustrating for the client and the agent when you finally find the right home and lose it to a cash investor,” she said. “It’s exhausting. It’s hard to manage your customers’ expectations when it’s so fluid that way.
Bonner will be one of the first agents in Florida to use Ribbon as a tool, and hopes the company can give residents struggling to find a home a helping hand. She said she saw that many homeowners were afraid to sell their homes, fearing that if they sold too quickly, they might not be able to buy another in this competitive market. Many lenders require homeowners to sell their current home before buying the next, she said.
“Salespeople have the luxury of saying no to these offers,” Bonner said. “And it is intimidating for some of these buyers to be able to participate in this current market.”
Ribbon is able to act as a bridge between buyer and seller during this transition period. The company does not guarantee that the offer will be accepted, but it does guarantee the sellers that the transaction will be completed.
“We are able to take buyers, FHA and VA or conventional mortgages and then increase your likelihood of acceptance by turning them into a cash offer,” Shah said.
Andrew Bouery, an Atlanta buyer in the Army National Guard, was trying to buy a home with 20 other offers and couldn’t stand out with his VA loan. His realtor Edgar Gonzalez of EXP Realty said he was also struggling with his other clients.
“I knew we would be at the bottom of the pile,” Gonzalez said of the VA loan. “I had to start looking for other alternatives to be competitive. Otherwise, I won’t be able to buy a house from these guys.
Gonzalez found Ribbon via an Instagram ad and contacted to try it out. It ended up giving Bouery a boost and he found a home. He was able to move in, paid the rent to Ribbon while the military settled the mortgage papers and had extra time to buy the house.
Tampa Bay ranked among the top 25 metropolitan areas in the United States that saw the largest increase in home sales in 2021 with growth of more than 8% between January and June, according to Credible, a loan market in line. It was one of 10 Florida regions on the list, with increases largely due to shortages of home inventory during the pandemic.
“At the high end of the market, the really rich are doing well. They have the money and they can deploy those resources, ”said Daniel Roccato, professor of finance at the University of San Diego and personal finance expert at Credible. “At the other end of the market, especially a first-time buyer, this part of the market has been hit very hard because of the price increase. “
Looking at the big picture, Roccato said, more options for buyers increase competition, which is healthy for the market. But there is always a cost to consider.
Ribbon charges a fee of 1% to 3.25%, more than any other state the company serves, due to Florida’s higher closing costs.
“Carefully weigh this against the traditional tool of getting a pre-approval letter and collecting your down payment,” Roccato said.