The FTC is refunding nearly $62 million to sellers who were misled by Opendoor Labs Inc.'s advertising claims. The FTC found that Opendoor deceived sellers into thinking they would make more money selling through their service compared to traditional methods, while also saving on costs. In reality, sellers often made less money with Opendoor and incurred higher costs. Opendoor used deceptive tactics in pitching their service to sellers. The refunds aim to compensate affected consumers and deter deceptive practices in the real estate market. READ MORE HERE
Here is the gist of when it all went down in August, 2022. It's a great straightforward explanation by Amy Hebert, Consumer Education Specialist.
When you sell a house, you're looking to get the most you can for it. What if a company promised you’d make more money selling it to them than you would on the open market? You’d probably say, “Sold!” According to the FTC, that’s what house buying company Opendoor Labs told people looking to sell their homes — but that wasn’t the reality.
Also, Lesley Fair, consumer advocate, goes on to say that the Arizona-based Opendoor advertised its iBuyer service to people looking to sell their homes. The pitch: Opendoor’s cutting-edge technology would save sellers money by providing “market value” offers and reducing transaction costs. According to the company, “We don’t try to make ‘low ball offers’ because, unlike a home flipper, our business model isn’t based on buying low and selling high. The way we make money is by charging a fee for our service” – a process the company described as “transparent, fair, and accurate.”
Once homeowners expressed initial interest, Opendoor sent them eye-catching charts that claimed to show a side-by-side comparison between customers’ projected net proceeds from selling their home to Opendoor versus selling it “traditionally” by listing on the market. The FTC says the charts almost always projected that homeowners would get thousands more by selling to Opendoor. As the complaint alleges, “As of November 2019, over 90 percent of these charts used in accepted offers projected that the consumer would realize more net proceeds by selling to Opendoor. The average projected gain was more than $6,000.”
That’s how Opendoor promoted its services, but the FTC says that’s not how it panned out for most people. According to the complaint, “In fact, the vast majority of consumers who sold to Opendoor lost thousands compared to what they would have realized in net proceeds from selling on the market because Opendoor’s offers have been below market value on average and its costs have been significantly higher than what consumers typically pay.”
The complaint alleges that Opendoor engaged in practices that both increased the costs to customers and reduced offers to below market value. Opendoor’s approach to home repairs is one example. The company told prospective customers that after an in-person assessment of the property, it may require them to make or pay for certain repairs. However, Opendoor also said that it “ask[s] for the repairs we anticipate the next buyer of the home will ask for” – fixes that customers would have to address before a traditional sale, too. Opendoor further claimed that consumers may even save money on repairs if they sell to Opendoor because “we do our best to pass wholesale savings on to you from our partnerships with local vendors.” But according to the FTC, Opendoor’s required repairs often cost thousands more than what people would have to pay before a traditional sale.
Furthermore, the FTC says Opendoor often took steps that reduced its offers to below what the company’s own internal valuation system determined was the home’s market value. You’ll want to read the complaint for details, but the allegation is that in many instances, the company “adjusted offers to two percent below what Opendoor assessed as market value” – a practice that contradicted what it told homeowners.
Opendoor promoted itself as tech company that uses its pricing technology to offer more accurate offers and lower costs. Companies like Opendoor are what’s known as “iBuyers” — companies that use technology to make quick offers on homes. According to the FTC, Opendoor said it would pay market value for people’s homes while saving them money on costs. That way, people selling their homes would make thousands of dollars more than they would on the open market. But, the FTC says, it wasn’t true.
Instead, the FTC says Opendoor’s offers were lower than a home’s market value, and the company asked sellers to pay for home repair costs that were higher than what people would typically spend on repairs in a market sale. As a result, most people who sold their homes to Opendoor typically lost thousands of dollars compared to what they would have made if they’d sold their homes on the open market.
To settle the FTC’s charges that the company’s claims were deceptive, Opendoor has agreed to pay $62 million, which the FTC will use for refunds to people who were affected.
The Federal Trade Commission (FTC) has taken action against Opendoor Labs Inc., an online home buying company, for deceiving potential home sellers with misleading claims about their service. Opendoor misled sellers into thinking they could make more money selling their homes through Opendoor rather than using traditional methods. In reality, most sellers ended up making less money with Opendoor. Opendoor used deceptive marketing tactics, including comparing their offers to traditional sales, which often resulted in sellers losing thousands of dollars. The FTC's investigation found that Opendoor misrepresented various aspects of their service, including market value prices, fees, repair costs, and overall costs compared to traditional sales.
As part of the enforcement action, Opendoor will pay $62 million and is prohibited from making deceptive claims about how much money sellers will receive or the costs associated with using their service. They must also provide evidence to support any claims about cost savings or financial benefits. This action aims to protect consumers from deceptive practices in the real estate market.
This information was provided by FTC.Gov
