Fintech startup Ribbon has launched Appraisal Protection, a new service that enables homebuyers who use RibbonCash Offers to make all-cash offers without worrying about appraisal contingencies. With Appraisal Protection, Ribbon will cover the difference for under-appraised listings.
The service is available in all Ribbon markets, including North Carolina, South Carolina, Tennessee, Georgia and Texas.
“We are seeing a dangerous trend in today’s market – middle-class families, especially in the starter home market, are losing out on homes to institutional investors and high net worth individuals,” Ribbon Co-Founder and CEO Shaival Shah said in a press release on Wednesday. “This has only strengthened our commitment to our mission.”
To get started, homebuyers must provide a pre-approval letter from their lender so Ribbon can determine the amount they’re willing to back them through RibbonCash Offers. After completing the RibbonCash Offers approval process, buyers can begin the hunt for the perfect home.
After choosing a home they’d like to purchase, buyers can request a Ribbon Max Value, which is the maximum purchase price Ribbon is willing to offer for that particular listing. Homebuyers can arrange an offer that is higher than the Ribbon Max Value, but they will have to cover the difference.
From there, the homebuyer can make an all-cash offer for the Ribbon Max Value amount, which allows them to make a competitive offer without an appraisal contingency. If their offer is accepted and the home appraises under the offer amount, Ribbon will cover the difference so the deal can move forward.
“Let’s say you want to make an offer on a home listed at $350,000. You request a valuation from Ribbon through our platform and we value the home at $365,000 (this is the Ribbon Max Value),” an explainer read. “It’s a competitive market so your buyer wants to offer over list price, at $360,000.”
“If the home appraises for $355,000, usually you’d have to attempt to negotiate with the seller or walk away from the deal, however with Appraisal Protection, Ribbon will cover the difference of $5,000,” it added.
Homesellers can take advantage of Appraisal Protection through Ribbon’s buy-before-you-sell service Ribbon Boost for a 1 percent flat fee. If a seller runs into a financing roadblock, Ribbon will purchase the home through its Ribbon Reserve service for a 2 to 2.4 percent flat fee. Sellers will have 180 days to secure their financing, after which they’ll purchase the home from Ribbon for the same price.
“Appraisal Protection is one of the ways we can level the playing field and help everyday families turn their dream of owning a home into a reality,” Shah said.
Since its launch in 2018, Ribbon has raised more than $555 million from two funding rounds. The company counts Trulia co-founder Pete Flint as one of its staunchest supporters.
“Ribbon is proving that superior technology and data plus capital is what it will take to truly transform the real estate industry,” Flint said in 2019.