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Shelby County house hunters say they can't compete without cash offers

The housing crunch in Shelby County has homebuyers trying to compete with investors, and finding traditional financing a sticking point.

MEMPHIS, Tenn. — Shelby County house hunters who have had a hard time buying a home with traditional financing have found third-party companies can help them compete with cash offers from investors.  

It is estimated one out of three home sales in Shelby County are cash purchases, which many sellers prefer. 

To compete against investor cash, companies like Ribbon essentially turn a traditional offer into a cash offer. Ribbon either backs a buyer's purchase, or the company purchases the home and holds it until the buyer secures financing after closing. 

"All of these people are coming in trying to buy homes for cash, and that puts the everyday consumer at a disadvantage. So we wanted to level the playing field, to put the consumer at the top for any given selling to ensure ownership," said Shaival Shah, Ribbon CEO.

Ribbon operates in six states, including Tennessee, but plans to expand to 22 states by 2022.

"What we have fundamentally done is change the timing of the need for a mortgage, and we've removed the mortgage requirements to get your offer accepted," said Shah.

"There are so many investors snatching these houses," said new homeowner Whitney Solorzano.

She and her husband first learned about Ribbon when they sold their home earlier this year. The person they sold their house to used Ribbon to make an offer. It was for $6,000 more than the list price and Ribbon was a guaranteed offer. 

"The buyers of our home used Ribbon, that set their offer apart from those had put in offers beside them," said Solorzano.

When Solorzano started house shopping, she bid on house after house. When she didn't win any bids, she and her realtor explored using Ribbon. 

"They kept getting shut out of these offers, then we decided to explore it for them," said realtor Jeanna Groome.

Once they made a bid backed by Ribbon, they got the house. 

"Out of the six we offered, it was the one we submitted with Ribbon that we got, " said Solorzano.

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Companies that provide home-buying guarantees charge for their services. Ribbon fees can range from 1% to 2.4%, depending on homebuyer needs, according to Groome.

While some skeptics believe you do not need to pay a premium to buy a home, Groome said it is a way for frustrated clients to compete and finally seal a deal.

"Free market capitalism will find a way. If there is a problem, someone will figure out a way to make money solving it," said Groome.

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