Homebuyers in metro Denver have faced a tough market for years, with listings in short supply and multiple failed bids common on the path to the closing table. It can be especially frustrating when they lose out to cash buyers, whether investors looking to acquire rental properties or transplants who are shifting money from more costly housing markets.
The key advantage investors, especially the larger ones, have over consumers is that they can raise capital and pay cash to purchase a home. Offers made using FHA, VA and USDA loans, which are more popular with first-time buyers, tend to fall to the bottom of the pile. Cash is king for a reason, even if a seller would prefer to hand over their home to a young family rather than a private equity fund.
And there is no guarantee that once an offer is accepted that it will make it to the finish line. About one in three home purchases under contract either get delayed or terminated, an enormous cost and source of friction for consumers, real estate agents and lenders alike, Shah said. Where Ribbon tries to add value is by smoothing out the purchase process, Shah said. It will guarantee a purchase price within a pre-established range to qualified borrowers and provides the amount in cash at closing. Depending on the level of protection desired, costs can run from 1% to 1.5% to 2.25% of the purchase price.
Bellinger said he was sold on the program after that and has used it on other purchases that have gone more smoothly. Offering a seller cash without contingencies, apart from the inspection, and free of appraisal risk allows for a smoother and more seamless process, he said. It also eliminates the headache some buyers face of having to make two moves across three locations when the timing between a sale and purchase doesn’t line up.