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Wednesday, August 3, 2022
FTC Fines iBuyer Opendoor $62M for ‘Tricking’ Sellers
By Kerry Smith
The FTC alleges the iBuyer used “misleading and deceptive information,” and its sellers “made thousands of dollars less” than they could have via a traditional listing.
WASHINGTON – The Federal Trade Commission (FTC) today took action against an online iBuyer. It claims Opendoor Labs Inc. cheated potential home sellers by tricking them into thinking that they could make more money selling their home to Opendoor than on the open market using a traditional sales process.
The FTC alleges that Opendoor used misleading and deceptive information when in reality, most people who sold to Opendoor made thousands of dollars less than they would have made selling their homes using the traditional process.
Under a proposed administrative order, Opendoor must pay $62 million and stop its deceptive tactics.
“Opendoor promised to revolutionize the real estate market but built its business using old-fashioned deception about how much consumers could earn from selling their homes on the platform,” says Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “There is nothing innovative about cheating consumers.”
Opendoor, headquartered in Tempe, Arizona, operates an online real estate business that, among other things, buys homes directly from consumers as an alternative to consumers selling their homes on the open market. Advertised as an “iBuyer,” Opendoor claimed to use cutting-edge technology to save consumers money by providing “market-value” offers and reducing transaction costs compared with the traditional home sales process.
Opendoor’s marketing materials included charts comparing their consumers’ net proceeds from selling to Opendoor versus on the market. Those charts almost always showed that consumers would make thousands of dollars more by selling to Opendoor. In fact, the FTC complaint states that the vast majority of consumers who sold to Opendoor actually lost thousands of dollars compared with a traditional real estate sale. It says Opendoor’s offers have been below market value on average and its costs higher than what consumers typically pay when using a traditional Realtor.
FTC claims of misrepresentation include:
Opendoor said it used projected market value prices when making offers to buy homes, when in fact those prices included downward adjustments to the market values
Opendoor said it made money from disclosed fees, when it actually made money by buying low and selling high
Consumers likely would have paid the same amount in repair costs whether they sold their home through Opendoor or in traditional sales
Consumers likely would have paid less in costs by selling to Opendoor than they would pay in traditional sales
Opendoor has agreed to a proposed order that requires the company to:
Pay $62 million: The order requires Opendoor to pay the Commission $62 million, which is expected to be used for consumer redress.
Stop deceiving potential home sellers: The order prohibits Opendoor from making the deceptive, false, and unsubstantiated claims it made to consumers about how much money they will receive or the costs they will have to pay to use its service.
Stop making baseless claims: The order requires Opendoor to have competent and reliable evidence to support any representations made about the costs, savings or financial benefits associated with using its service, and any claims about the costs associated with traditional home sales.
Opendoor ‘strongly disagrees’ with the allegations
“While we strongly disagree with the FTC’s allegations, our decision to settle with the Commission will allow us to resolve the matter and focus on helping consumers buy, sell and move with simplicity, certainty and speed,” Opendoor said in a statement. “Importantly, the allegations raised by the FTC are related to activity that occurred between 2017 and 2019, and target marketing messages the company modified years ago.”
The company says it’s “pleased to put this matter behind us and looks forward to continuing to provide consumers with a modern real estate experience.”