The Federal Trade Commission is fining home-buying company Opendoor $62 million for “cheating” home sellers.
In a settlement announced on Monday, the FTC said Opendoor told customers that they could make more money selling their homes to it than they by selling homes traditionally. The FTC found that in fact, most people who sold their homes to Opendoor made less money than they would have selling to regular buyers via a real-estate agent.
Opendoor, which bought 36,908 homes in 2021, is an instant buyer, or iBuyer, which buys homes directly from owners and then resells them, sometimes making small renovations to the home. The company is able to close on homes much more quickly than traditional buyers purchasing via a real-estate agent. Opendoor, which reported $28 million net income in the first quarter of 2022, makes money by charging its own fee in the place of a traditional brokers’ fee.
The FTC detailed why Opendoor’s marketing materials were deceptive in a 14-page report that included screenshots of Facebook ads and website charts of costs shown to customers. The FTC said this evidence seemed to promise consumers they would make more money by selling to Opendoor because all fees were bundled together into one amount. In reality, they often paid more.
The agency also challenged the company’s claim that it purchased homes at market prices, and said that the company’s offers are, on average, below market value.
“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,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a statement provided by the agency. “There is nothing innovative about cheating consumers.”
The proposed order includes the $62 million fine, which the agency expects to use to pay back Opendoor customers who were bilked. The FTC also ordered the company to cease any “deceptive” practices against potential home sellers and to stop making any “baseless” claims.
Opendoor issued its own statement Monday, noting that the company’s leaders “strongly disagree” with the allegations but are settling with the commission anyway. It also said that the FTC’s allegations were specifically related to homes Opendoor purchased between 2017 and 2019, and that the company has since already modified its marketing messages.
Opendoor, which was founded in 2014 by Eric Wu and , went public at the end of 2020 after raising $1.5 billion from investors. In a 2020 SEC filing, the company disclosed that its advertising practices were being investigated by the FTC.
Do you sell your home to Opendoor? Do you have a story about your experience? Contact reporter Alex Nicoll via encrypted messaging app Signal at +1 (646) 768-4772 using a non-work phone, email at email@example.com, or Twitter DM at @AlexONicoll.
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