Today the Federal Trade Commission took action against online homebuyer Opendoor Labs Inc. , to deceive potential home sellers by tricking them into believing that they can make more money selling their homes on Opendoor than on the open market using the traditional selling process. The Federal Trade Commission (FTC) alleged that Opendoor lured potential sellers using misleading and misleading information, and in fact, most of the people who sold to Opendoor made thousands of dollars less than selling their homes the traditional way. Under a proposed administrative order, Opendoor will have to pay $62 million and stop its deceptive tactics.
“Opendoor promised to revolutionize the real estate market, but it built its business using old-fashioned deception about how much consumers could earn selling their homes on the platform,” said Samuel Levine, director of the Federal Trade Commission’s Office of Consumer Protection. “There is nothing innovative in deceiving consumers.”
Opendoor, which is headquartered in Tempe, Arizona, runs an online real estate company that buys, among other things, homes directly from consumers as an alternative to consumers selling their homes on the open market. Advertised as “iBuyer,” Opendoor says it uses the latest technology to save consumers money by providing “market value” offerings and reducing transaction costs compared to the traditional home sale process.
Opendoor’s marketing materials included charts comparing net consumer revenue from selling to Opendoor against the market. These graphs have always shown that consumers will earn thousands of dollars by selling to Opendoor. In fact, the complaint notes that the vast majority of consumers who sold to Opendoor in fact Lost Thousands of dollars compared to selling in the traditional market, because the company’s offerings were below market value on average and their costs were higher than what consumers would normally pay when using a traditional realtor.
The agency’s investigation concluded that Opendoor also violated the law by misrepresenting the following:
- Opendoor used projected market value prices when bidding for homes, when in fact these prices included downward adjustments to market values;
- Opendoor makes money from the stated fees, when in fact it makes money by buying low and selling high;
- Consumers will likely have paid the same amount in repair costs whether they sold their home through Opendoor or in traditional sales; And the
- Consumers will likely pay lower costs with selling to Opendoor than they would with traditional sales.
Opendoor has approved a proposed order that requires the company to:
- Pay $62 million: It requires Opendoor to pay the commission $62 million, which is expected to be used to compensate the consumer.
- Stop scamming potential home sellers: The order prohibits Opendoor from making deceptive, false and unsupported claims it has made to consumers about how much money they will get or costs they will have to pay to use its service.
- Stop making baseless claims: It requires Opendoor to have competent and reliable evidence to support any representations made about the costs, savings or financial benefits associated with the use of its service and any claims about costs associated with traditional home sales.
The Commission’s vote to accept the consent agreement was 5-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, after which the committee will decide whether to make the proposed approval order final. Instructions for posting comments appear in the posted notification. Once processed, comments will be posted to the bylaws.
note: When the Commission issues an order of approval on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $46,517.