Opendoor Labs, an online home buying platform, has agreed to pay $62 million settlement to the Federal Trade Commission (FTC) over misleading marketing practices where they persuade people to sell their properties on the site.
The company claimed that they allow homeowners to "sell their properties more quickly in the platform than through a broker," according to the New York Times.
FTC accused the company of deceiving customers to sell their properties to Opendoor for less than the actual value in the market.
FTC Alleged that Opendoor is Deceiving Customer
Over the years, Opendoor has boasted that it is utilizing its pricing technology to provide "more accurate offers and lower costs." This method is used by these "iBuyers" to make quick offers on properties.
The real estate technology company used enthusiastic claims that home owners would make thousands of dollars more if they sell their properties to the company than they would make on the open market.
However, according to the FTC, that wasn't true, as the commission claimed that Opendoor's offers are lower than a property's market value.
Moreover, FTC alleged that the company actually required sellers to pay more for home repair costs "that were higher than what people would typically spend on repairs in a market sale," as per TechCrunch.
According to the agency, the company had shown home sellers charts containing information that they would earn thousands of dollars more when they sell their properties on the platform compared with a broker.
In a statement on Monday, Opendoor said that it disagreed with the FTC's allegations. But they nevertheless decided to settle with the commission to allow them to resolve the matter.
In addition, the company said that their decision on the settlement will help them focus on helping consumers "buy, sell and move with simplicity, certainty and speed."
According to Opendoor, the allegations brought about by the FTC are connected to the activity that happened between 2017 and 2019. They claimed that target marketing messages of the company was modified years ago.
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FTC Will Use $62 Million Settlement for Customers' Refund
The settlement shows to have an effect not only to Opendoor. It also impacted the whole iBuying industry, which has operated based on similar claims over the past years.
Opendoor is just one of the many services in the "iBuying" space. Such companies make use of algorithms to identify a home's value and purchase it for cash. In the United Stated, iBuying was recorded to obtain 1 percent of home sales.
According to Samuel Levine, director of the FTC's Bureau of Consumer Protection, Opendoor claimed that it will revolutionize the real estate market. However, it built its business using old-fashioned deception.
FTC said that the $62 million settlement will be used to provide refunds to people who were affected by the company's deceit.
In late December 2020, Opendoor went public after it completed the merger with the SPAC Social Capital Hedosophia Holdings II, headed by investor Chamath Palihapitiya.
The company offered its stock to the public for the first time at $31.47 per share. Today, shares of the company were trading at $4.78. This is only a bit higher than Opendoor's 52-week low of $4.30.
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