Opendoor fined $62M to settle claims of cheating home sellers
TEMPE, AZ (3TV/CBS 5) - Opendoor has agreed to pay a $62 million dollar penalty to settle allegations of misleading potential home sellers. The Federal Trade Commission claims the Tempe-based online real estate business tricked sellers into thinking they could make more selling their homes to Opendoor rather than a traditional buyer.
According to an FTC complaint, “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.” And the company knew it. The FTC says the iBuyer’s “own internal analyses show that consumers lost money selling to Opendoor.” The company also regularly required costly repairs that sellers wouldn’t have had to make in a traditional sale, the FTC alleges.
“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, the director of the FTC’s Bureau of Consumer Protection. “There is nothing innovative about cheating consumers.”
“You get a letter that promises the world and that sounds exciting. The problem that sellers run into is they don’t know compared to what,” said Kelly Henderson, a Phoenix real estate agent. “If [Opendoor] is willing to pay that, they feel confidently they can get more money because they have to turn around and sell it.”
Henderson says the red-hot Arizona housing market helped fuel the fast-paced iBuyer industry. “If you choose to forego money in exchange for convenience, there’s nothing wrong with that. There’s frankly probably plenty of sellers who got exactly what they wanted,” Henderson said. “But the issue here was the way it was approached and how many people probably lost out on a lot of money.”
Opendoor declined On Your Side’s request for an interview but sent a statement defending the company’s model.
“Since our founding in 2014, Opendoor set out to drastically simplify the real estate transaction, redefine the housing market, and make buying and selling a home as easy as a tap of a button – bringing transparency, competition and convenience to the antiquated and offline home transaction for consumers. 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. 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,
In addition to the $62 million penalty, the settlement agreement also prohibits Opendoor from making deceptive, false, or unsubstantiated claims to consumers. The FTC was not immediately able to provide information about how many Arizona consumers are affected, and it has not yet been determined how the $62 million will be dispersed to consumers.
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