FTC orders Opendoor Labs to pay $62 million for deceiving potential home sellers

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Opendoor
Image credit: Opendoor.com

The Federal Trade Commission (FTC) took action against Opendoor Labs, an online real estate business operator, for deceiving potential home sellers by making false and unsubstantiated claims regarding its service and the costs associated with traditional home sales.

The online real estate business operator agreed to settle the FTC’s allegations by agreeing to a proposed order that requires the following:

Opendoor will pay the FTC $62 million, which would be used to provide compensation to consumers affected by the company’s deceptive and unfair business practices.

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The company will stop making deceptive, false, and unsubstantiated claims regarding how much money consumers will receive or the costs they will have to pay to use its service.

It will also stop making baseless claims regarding the costs, savings, or financial benefits associated with using its services and any other claims related to traditional home sales. It must have competent and reliable evidence to support any representations.

Allegations against Opendoor

In its administrative complaint, the FTC alleged that Opendoor violated Section 5(a) of the Federal Trade Commission Act by engaging in unfair and deceptive business practices.

Opendoor allegedly falsely told consumers that it makes money from a “service charge” than “buying low and selling high.” The company also allegedly lied to consumers that it would use cutting-edge technology to save them money by providing “market-value” offers and lowering transaction costs if they sold their homes to it.

In other words, Opendoor falsely claims that consumers would make more money selling their homes to it than from a traditional sale.

According to the FTC, in reality, Opendoor made offers to consumers’ homes using projected market value prices, which included downward adjustments to the market values. The company company made money by buying low and selling high.

Additionally, the Commission alleged the Opendoor claimed that consumers would save money on repairs by passing wholesale savings from its partnerships with local vendors.

In fact, the FTC’s investigation found that consumers would have paid the same amount in repair costs whether they sold their homes to Opendoor or in traditional sales.

Opendoor’s purchase offers for consumers’ homes have been below market value on average. Its costs have been highen than what consumers would normally pat when using a traditional realtor, according to the Commission.

The FTC noted that “the vast majority of consumers who sold to Opendoor actually lost thousands of dollars compared with selling on the traditional market.”