The Federal Trade Commission announced Monday that it is fining Opendoor Labs Inc., for its deceptive trade practices.
The FTC alleges that the Eric Wu-led iBuyer pitched its services to potential home sellers by using misleading and deceptive information that led sellers to believe that they could make more money selling their home to Opendoor than on the open market using the traditional home sale process. In reality, according to the FTC, most people who sold to Opendoor made thousands of dollars less than they would have made selling their homes using the traditional process.
“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, the director of the FTC’s Bureau of Consumer Protection, said in a statement. “There is nothing innovative about cheating consumers.”
In its investigation of Opendoor, the FTC took issue with Opendoor’s marketing material, which include charts comparing consumers’ net proceeds from selling to Opendoor versus on the open market. The FTC said the charts almost always showed that consumers would make thousands of dollars more by selling to Opendoor. In many states, the FTC found that consumers who sold to Opendoor lost thousands of dollars, as 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.
Through its investigation, the agency also found that Opendoor violated the law by misrepresenting how the firm calculated the home’s market value, how Opendoor made money, how much consumers likely would have paid in home repair costs when selling on the open markets, and how much consumers would have paid in costs by selling in a traditional sale.
In addition to the $62 million fine, which is expected to be used for consumer redress, the proposed consent order also stated that Opendoor must stop making “deceptive, false, and unsubstantiated claims” about home much money consumers will received or the costs they will incur using its services, and it must provide “competent and reliable evidence to support any representations made about the costs, savings, or financial benefits associated with using its service, and any claims about the costs associated with traditional home sales.”
The proposed consent order will be subject to public comment for 30 days. After that period, the FTC will decide whether to make the proposed consent order final. Opendoor has agreed to the proposed consent order.
“While we strongly disagree with the FTC’s allegations, our decision to settle with the Commission will allow us to resolve the matter and focus on helping consumers buy, sell and move with simplicity, certainty and speed,” Opendoor wrote in a statement to investors. “Importantly, the allegations raised by the FTC are related to activity that occurred between 2017 and 2019 and target marketing messages the company modified years ago. We are pleased to put this matter behind us and look forward to continuing to provide consumers with a modern real estate experience.”