RALEIGH – The technology-enabled iBuyer Opendoor, which offers homeowners an “instant” offer for their property and operates in multiple North Carolina housing markets, may be responsible for paying a $62 million fine and stopping “deceptive tactics,” under a new proposed administrative order from the Federal Trade Commission (FTC).
“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, in a statement. “There is nothing innovative about cheating consumers.”
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What’s happening with the iBuyer Opendoor
The Federal Trade Commission alleged that the company pitched its services to homeowners “using misleading and deceptive information” in its advertising channels, including on Facebook and Twitter, between 2017 and 2019.
The complaint alleges that, “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.” The FTC also included this section of the complaint, without redactions, in a statement published on Monday.
The complaint also alleges that as a part of the company’s agreement with home sellers, consumers were sent a list of required repairs and “demanded that consumers make or pay for all demanded repairs, even though Opendoor’s own studies indicate that the parties to a market sale typically share these costs” and that these were not negotiable.
“As part of the repair process, Open door has sent consumers a list of required repairs with the cost it would charge consumers if they agree to deduct the costs from their sales proceeds,” the compliant alleges. “The list of repairs has been typically well beyond what consumers would be responsible for in a market sale. Opendoor has routinely requested upgrades to, or replacement of, functional heating and cooling systems, flooring, and roofs. It has also frequently demanded cosmetic changes such as repainting and replacement of items that could be repaired at far lower cost.”
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Other findings
The agency investigation also found Opendoor violated federal law by misrepresenting information including the following, according to a statement published by the FTC:
- “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.”
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What’s next for the iBuyer Opendoor
Now, following the investigative action, the company said it and the FTC had approved a comprehensive settlement agreement in a statement published by the company.
The statement from the FTC noted that the Commission vote to accept the consent agreement was 5-0, and the agreement included a payment of $62 million, expected to be “used for consumer redress,” as well as to stop the practice of “deceiving potential home sellers” and “making baseless claims.”
Opendoor put out a statement on Monday, as well.
“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,” the company statement reads. “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,” it continues.
Earlier this year, Opendoor was disciplined by the North Carolina Real Estate Commission following multiple complaints. The disciplinary action came following findings that the company failed to disclose material facts on three separate transactions in the state.
The company’s general manager that oversees the company’s operations in North Carolina, Jon Enberg, declined to comment on this story.
