A proposed administrative order says that Opendoor will have to pay $62 million and stop being dishonest.
The $62 Million Fine
Opendoor Labs Inc. has been hit with a $62 Million fine by Federal Trade Commission (FTC) on August 1 for tricking people into thinking they could make more money selling their home to Opendoor than on the open market with a local real estate agent. The FTC said that Opendoor gave misleading and false information to people who wanted to sell their homes. In reality, most people who sold their homes to Opendoor made thousands of dollars less than they would have if they had used the traditional way to sell their homes.
Samuel Levine, head of the FTC's Bureau of Consumer Protection, said,
“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.” He then added that “there is nothing innovative about cheating consumers.”
In their marketing materials, Opendoor had charts that showed how much more money their customers made when they sold to Opendoor instead of on the market. Most of the time, these charts showed that people would make a lot more money by selling to Opendoor. In fact, the complaint says that most people who sold to Opendoor lost thousands of dollars compared to selling on the traditional market. This is because, on average, the company's offers were less than the market value, and its costs were higher than what people usually pay when using a traditional realtor.
During the investigation, the agency found that Opendoor also broke the law by lying about:
Opendoor used projected market value prices when making offers to buy homes, but those prices included downward adjustments to the market values
Opendoor said that it made money from disclosed fees, but in reality, it made money by buying low and selling high
Sellers were misled into thinking that they would have paid less in closing costs by selling to Opendoor than to a traditional buyer
What’s Next for Opendoor
This complaint will be sent to the Department of Justice (DOJ) which is responsible for collecting the money on behalf of the FTC. It will be up to the DOJ as to how much of the $62 Million that they actually collect. The FTC plans to use the collected money as redress for deceived home sellers.
The FTC has ordered Opendoor to immediately cease and desist all deceitful messaging to home sellers. In a statement released by Opendoor, they said that they have not used any of this messaging since 2019. Furthermore, they said that they are happy to pay this fine and get back to “continuing to provide consumers with a modern real estate experience.”
Do you think that the FTC did the right thing by fining Opendoor? Let us know in the comments below or share with a colleague in an upcoming CE Class!