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In a world where a scarcity of listings is thwarting buyers and sellers alike, real estate agents are getting help from an unexpected corner: Transaction facilitation tools that provide access to alternative financing, helping their clients compete with investors making cash offers.
The founders of two companies that are focused on partnering with real estate agents — Ribbon’s Shaival Shah and Homeward’s Tim Heyl — joined Inman editor-at-large Clelia Peters at Connect Now to shed light on how to make the most of what they have to offer.
Transaction facilitators like Ribbon and Homeward help first-time homebuyers compete with investors by making a cash offer and by buying a home on their behalf, and then renting the home to them until their financing is approved.
They can play a similar role for existing homeowners who are worried that they’ll have a hard time finding a new place to move into after they sell. A transaction facilitator lets existing homeowners make a cash offer and secure their new home first, and then put their home on the market.
“We guarantee the closing,” Shah said. “That allows the two sides to transact smoothly. I think what Tim and I are effectively trying to do to help empower the Realtor community is, we’re turning every single consumer into effectively an iBuyer.”
While Homeward and Ribbon are providing financing tools, “there’s also a really interesting opportunity here to expand the pool of buyers and sellers who you might be able to work with,” Peters noted. “And I think that, for many agents, is where the biggest opportunity lies, and maybe where they’re not thinking enough about leveraging these tools.”
Heyl agreed there’s a “chicken or the egg problem” that exists in both buyer’s and seller’s markets.
Even a decade ago, when there was a surplus of listings, “nobody wanted to accept contingent offers” out of fear that the buyer would have trouble selling their home, Heyl said.
Today, sellers know “they’ll sell their house in a day,” but “the issue is signing an agreement saying they’ll be willing to leave their house within 30 days, knowing how difficult it is to go find (another home) they like.”
Shah said Ribbon is currently available in five states — North and South Carolina, Tennessee, Georgia and Texas. Lining up capital partners to make home purchases, and understanding how to value homes and do underwriting in each new market takes time. But now that the company has perfected its playbook, it plans to be in half of U.S. states within the next 12 to 18 months, Shah said.
“Every state has its own nuances,” Heyl said. Homeward is currently available in Colorado, Georgia and Texas. “We’re looking at price points, market volatility, and where are the top agent partners we believe we want to be in business with?”
But there’s the potential for exponential growth, he said. Often a company will start out in one or two markets, and then double, and double again.
“So what’s going to happen for a lot of real estate agents is, maybe none of these solutions are available in your market today, but you’re going to blink, and they’re all going to be available in your market. It’s going to be gradual, and then suddenly” transaction facilitators like Homeward and Ribbon will be everywhere.
Last summer Knock launched its Home Swap offering, which allows homeowners to make a non-contingent offer and close on a new home before listing their old house, using a competitively priced mortgage from Knock and an interest-free bridge loan. With the addition of six new markets in the Carolinas this month, the program program now available in 40 markets throughout 10 states. Knock has hired Goldman Sachs to help the company prepare for a public offering this year.
Shah expects demand for such services will outlive the current conditions.
“We do believe that when the market starts to receive some normalcy, you’ll start to continue to see that cash becomes the new normal, and more importantly, the guaranteed close becomes the new requirement.”