Brianna Hourihan stands outside of the house that she owns a unit in in Charlotte, N.C., on Friday, July 15, 2022. Hourihan was able to make an all-cash offer on this home using a service called Ribbon.
Khadejeh Nikouyeh
Knikouyeh@charlotteobserver.com
The home wasn’t great on the outside and it was being sold as-is. But it was in Elizabeth, among the neighborhoods where Brianna Hourihan was determined to buy.
So, even though she wasn’t crazy about the house — it would need a lot of work — Hourihan last winter prepared an offer over the asking price. The next day she learned that someone else had made a better offer: $50,000 over ask, all-cash, sight-unseen.
This wasn’t the first time Hourihan had missed out on a home in Charlotte. She’d offered on six houses with no success; Hourihan was beaten-down.
“I was probably like one more showing away from throwing in the towel,” she said. “I felt like I was putting in fairly competitive offers for the area, going way over asking price, and coming up way short.”
Her real estate agent, Amanda Rex of Coldwell Banker, suggested she use Ribbon, a company that says it can level the playing field for homebuyers competing in the investor-infested waters of Charlotte’s housing market.
For a fee, Ribbon allows homebuyers to make all-cash offers like the investor buyers do to flex financial muscle in a market where relying on a mortgage approval to buy a house can be a deal-breaker. Ribbon is one of a handful of companies that have emerged recently in response to large investors entering the housing market.
As investors have scooped up houses in the Charlotte area, buying a quarter of all houses sold in the city in 2021, according to a Washington Post analysis, middle class folks, like Hourihan, often lose out while trying to snag a piece of the American Dream.
Wall Street investors, in particular, have impacted Charlotte’s housing market by dropping seemingly endless amounts of money to buy up starter homes in suburban subdivisions, paying well above the asking price, sometimes without even requiring an inspection.
In Security for Sale, an investigation published in May, The Charlotte Observer and The News & Observer reported that in the past decade Wall Street firms bought up more than 40,000 single-family homes in North Carolina’s three largest metro areas, turning them into rentals. In Mecklenburg County, corporate landlords own about 25% of all rental houses, the investigation found.
The fact that Charlotte is now a top market nationally for corporate landlords is what Shaival Shah, the CEO of Ribbon, said led the company in 2018 to Charlotte, which serves as the company’s dual headquarters alongside New York.
“The numbers have gone from ‘this is a problem’ to ‘this is officially a fire alarm’ with the amount of institutional investor buying,” Shah said in an interview with The Observer.
“We said there was one fundamental advantage that an investor has over a buyer. It was that investors were able to go to a seller and say ‘I will buy your home all cash with no contingencies.’ Now there is a way for consumers to fight back.”
The house that Brianna Hourihan owns a unit in in Charlotte, N.C., on Friday, July 15, 2022. Khadejeh Nikouyeh Knikouyeh@charlotteobserver.com
How it works
For clients approved on its platform, Ribbon will guarantee cash up front to secure homes. In return for that service, clients pay 1% of the purchase price. On a $350,000 house, Ribbon would collect $3,500.
In cases where the buyer is able to secure their financing before closing, they pay Ribbon’s fee and close the deal. In cases where the buyer may need more time, Ribbon will buy the house and rent it back to the buyer. Then, once the buyer is able, Ribbon will sell them the house for the original purchase price, plus a 2% fee.
Deed records show that, as of last month, Ribbon has bought 288 homes in Mecklenburg County since September 2018. Of those, the company has turned around and sold 266 of them. Only 53 of the homes sold by Ribbon were not sold for the same price the company paid for the house, according to county property records.
The 288 homes is not the total number of deals Ribbon has been involved in in the county, however, since the company’s name doesn’t appear on the deeds in which the buyer immediately secures financing. Shah said the company has helped people buy hundreds of additional homes in the Charlotte area.
Around half of all Charlotte real estate agents are registered on Ribbon’s platform, Shah said. Agents interviewed for this story said, for the right buyers, Ribbon is a good tool to have.
Rick Devine, an agent with Keller Williams in Charlotte, said his team has done dozens of deals with Ribbon. He said it’s particularly useful when buyers are moving from out of the area or trying to sell a house at the same time they’re buying a new one.
“That’s how you use Ribbon,” Devine said.
Rex, the Coldwell Banker agent who worked with Hourihan, has used Ribbon on several deals when her clients were competing with investors.
“When you had all these I-Buyers and investors coming in with boatloads of cash, you were able to have a step up or an edge,” Rex said about the company’s benefits. “You could present a cash offer. One percent was a small price to pay.”
For buyers, using Ribbon is simple: Real estate agents and lenders work with the company to get the guaranteed offer. Both Re and Devine said the buyer has little involvement in the process.
Rex, however, hasn’t used Ribbon in the past couple of months because she said the company’s policies have shifted slightly, making it less desirable for her clients. While Ribbon was previously willing to guarantee an offer, even if the house’s appraised value was below the selling price, the company has since added an additional fee for that service.
Devine said the new policy is sensible, though, since Ribbon was guaranteeing to cover the gap between the purchase price and the appraised value, sometimes for as much as $50,000. Now, he said, Ribbon asks for a fee of $250 for every $1,000 gap between purchase price and appraisal.
“People were going way, way over to get these homes and what they were trying to do was keep up,” he said. “Somebody goes $50,000 over asking, that’s a lot of money, you know.”
Now they’re saying, “‘OK we’ll give you that value but you’ve got to have some skin in the game.’”
Imperfect solution, critics say
While Ribbon and companies like it allow some homebuyers to compete in a housing market from which they may otherwise be excluded, researchers aren’t convinced they’re a solution to the problem.
“It is clearly part of the ecosystem of business models whose raison d’etre is the rise in (institutional) investor purchases,” Desiree Fields, a University of California, Berkeley professor and one of the leading researchers on institutional home investors, wrote in an email.
“My concern with models like Ribbon and similar companies is that they frame themselves as empowering homebuyers, democratizing access to the housing market… but when you look past the language of empowerment at how the model works, it seem likely to contribute to some of the same dynamics that create the problem they purport to solve.” she wrote.
Ultimately, Ribbon is an investor purchasing homes with all cash, too, but one that gives individuals a chance to buy the home, she said.
And even though Shah was explicit that Ribbon’s mission was to combat the impact of large investors in the housing market, his company has done business with some of those same firms.
Property records show that of the 266 homes Ribbon has sold in Mecklenburg County since 2018, the company has sold at least 16 houses to some of the biggest corporate landlords in the country, including Progress Residential, Hudson Capital Properties and Home Partners of America.
Shah said the only time Ribbon does not sell a house to a individual client is when that person is unable to go through with the deal.
Help for some
For Hourihan, the fee she paid Ribbon – less than $4,000 – was worth it.
In March, Hourihan bought a two-bedroom townhouse with a backyard off Briar Creek Road. It didn’t have the same charm as some of the houses she previously made offers on, but it was recently renovated and close to Plaza Midwood, another of her preferred neighborhoods.
“Up until that point I’d been putting in offers and obviously with how the market is, I got really concerned,” she said, adding that she kept seeing all-cash offers.
“I wouldn’t have been able to do that as a first-time homebuyer.”
This story was originally published July 15, 2022 at 2:45 PM.
Payton Guion is an award-winning investigative reporter for the Charlotte Observer. Prior to returning to his hometown paper, Payton reported for the Star-Ledger and the Asbury Park Press in New Jersey, and The Independent and VICE News in New York. He is a graduate of Appalachian State University with a master’s degree from Columbia University.
