FTC slams Opendoor with $62M settlement over false advertising claims

Opendoor has agreed to pay $62 million to settle charges by the Federal Trade Commission which said the company's claims that it helps people make more money by selling their house to the company rather than listing it on the open market were deceptive.

The FTC said that the real estate technology company has used its pricing technology to provide more accurate offers. iBuyers use this method to make quick offers on homes with enthusiastic claims that sellers would make thousands of dollars more than they would on the open market

The FTC said that wasn't true.

According to the commission, Opendoor asked sellers to fork out more for home repair costs that were higher than what people would typically spend on repairs in a market sale, even though Opendoor's offers were less than a home's market value.

The settlement will be used to give refunds to people.

Opendoor wrote a statement about the situation.

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.

For years, the iBuying industry has operated based on similar claims, and the agreement is a blow to it. Opendoor is one of a number of competitors that are trying to change the way they do things. It is common for startup's to promote themselves as the "open door"

The Department of Justice, which is in charge of collecting on behalf of the FTC in these matters, can make a difference in whether or not the full amount is paid.

Opendoor went public in December of 2020 after it completed its merger with SPAC Social Capital Hedosophia. The company's stock was offered to the public at a price. The company's shares were trading at $4.78 after hours, only slightly higher than their low of $4.30 The company is worth just under $3 billion, down from the $8 billion it was worth in 2011.

Opendoor raised $300 million at a pre-money valuation of $3.5 billion. It has raised more than 3 billion dollars in debt and equity to finance its home purchases. General Atlantic is one of the investors in the company.

Eric Wu is a founding partner of the fund.