August 1, 2022
The Federal Trade Commission today took action against online home buying firm Opendoor Labs Inc., for cheating 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 the traditional sales process. The FTC alleged that Opendoor pitched potential sellers using misleading and deceptive information, and 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 will have to 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,” said 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 complaint states, the vast majority of consumers who sold to Opendoor actually lost thousands of dollars compared with selling on the traditional market, because the company’s offers have been below market value on average and its costs have been higher than what consumers typically pay when using a traditional realtor.
The agency’s investigation found that Opendoor also violated the law by misrepresenting that:
- Opendoor used projected market value prices when making offers to buy homes, when in fact those prices included downward adjustments to the market values;
- Opendoor made money from disclosed fees, when in reality it 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; and
- consumers likely would have paid less in costs by selling to Opendoor than they would pay in traditional sales.
