The Federal Trade Commission today took action against online home-buying company Opendoor Labs Inc., for misleading potential home sellers into believing they could make more money selling their house at Opendoor than on the open market using the traditional sales process. The FTC alleged that Opendoor presented potential sellers using misleading and misleading information, and in fact, most people who sold to Opendoor made thousands of dollars. less than they would have done by selling their home using the traditional process. Under a proposed administrative order, Opendoor will have to pay $62 million and cease 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 selling their homes on the platform,” said Bureau Director Samuel Levine. of the FTC’s Consumer Protection. “There is nothing innovative about misleading consumers.”
Opendoor, headquartered in Tempe, Ariz., 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 offering “market value” deals and reducing transaction costs compared to the traditional home selling process.
Opendoor’s marketing materials included charts comparing their consumers’ net proceeds from selling to Opendoor versus the market. These charts almost always showed that consumers would earn thousands more by selling to Opendoor. In fact, according to the complaint, the vast majority of consumers who have sold to Opendoor actually lost thousands of dollars compared to selling in the traditional market, because the company’s offerings have been on average below market value and its costs have been higher than what consumers typically pay when calling on a traditional real estate agent.
The agency’s investigation found that Opendoor also broke the law by misrepresenting the following:
- Opendoor used projected market value prices when making offers to buy homes, when in fact these prices included downward market value adjustments;
- Opendoor made money from the disclosed fees, when in reality it made money by buying low and selling high;
- consumers would likely have paid the same amount in repair costs whether they sold their home through Opendoor or through traditional sales; and
- consumers would likely have paid less selling at Opendoor than they would have paid at traditional sales.
Opendoor has accepted an order proposal 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 misleading potential home sellers: The order prohibits Opendoor from making the misleading, false and unsubstantiated statements it has made to consumers about the amount of 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 regarding costs, savings or financial benefits associated with the use of its service, and any claims regarding costs associated with traditional home sales.
The Commission’s vote to accept the consent agreement was 5-0. The FTC will soon publish a description of the set of consent agreements in the Federal Register. The agreement will be subject to public comment for 30 days, after which the Commission will decide whether to make the proposed consent order final. Instructions for submitting comments are in the published notice. Once processed, comments will be posted on Regulations.gov.
REMARK: When the Board makes a consent order final, it has 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.