So, the FTC took “bold” action and whacked Opendoor for deceptive practices. It’s now an executed consent order, along with a $62 million fine — a lot of money for sure, but probably not as much as Opendoor would have spent litigating the consent order.
Initially, I did not plan on commenting on the event, because Opendoor is an iBuyer, and I do not really consider them a competitor. However, seeing all the “Ah, Ha! I told you so!” posts from industry peers, I feel I must respond.
As an industry, we need to stop gloating at the failures of competitors. It makes us all look bad. iBuyers have never reached more than 10% market share nationwide, and in many markets they don’t even exist.
A clear warning shot
The big issue here, that is totally being missed, is the fact that this is a clear warning shot across the bow of the entire real estate industry. For two years now, we have been warning as loudly as possible of the coming changes that will result because of the pending class-action lawsuits, and DOJ/FTC inquiries because of the executive order issued January 26, 2021.
If you are a real estate practitioner, you would be well advised to spend time researching these issues and focusing on modifying your business to survive the coming changes.
Opendoor presented the low-hanging fruit of offenses, and by jumping on it with this consent order, the FTC is clearly positioning itself to be the public’s hero against those “greedy” practitioners of real estate. The real estate agent who is driving up home prices, thereby reducing the availability of affordable housing, by charging such “high” commissions, supposedly. This is true especially as it relates to automatic shared compensation. No where else in the world is there an expectation that a real estate agent should get paid just because they brought a buyer to a transaction. If the client wants representation, the client hires representation.
The class-action lawsuits may or may not work out for the plaintiff(s). I am convinced that the DOJ and FTC have been biding time waiting until they can determine directional outcomes before moving forward to modify our industry through outright regulation. Don’t even get me started about the Pandora’s box this opens regarding liability of the practitioner’s fiduciary responsibilities.
Whether you feel all this is good, bad or are indifferent is irrelevant. If you are a real estate practitioner, you better be paying attention and preparing your business for a different way of doing business.
Phillip Cantrell is founder and CEO of Benchmark Realty.
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