FTC says Opendoor must pay $62 million after cheating home sellers
HOUSTON - The Federal Trade Commission says online homebuyer Opendoor must pay $62 million to settle charges that it cheated home sellers out of thousands of dollars.
iBuying is a growing industry in real estate, letting people buy and sell homes quickly and easily through online platforms.
But the FTC says Opendoor tricked sellers into thinking they could make more money selling to the company than selling on the open market, and it cost them thousands.
Michelle Green says Opendoor offered her $228,000 dollars to buy her Fort Worth, Texas home. She accepted the offer.
"I was looking for them to be honest, to assist me with all my questions because they made it sound so good," said Green.
Green says Opendoor quickly resold the home for about $40,000 more. And Green says Opendoor wanted $5,500 for repairs on the 2-year-old home. So she said she peeked inside the house during a showing.
"The house, the floor is still the same. They haven’t painted the wall because the marks are still on the walls," said Green.
"We were troubled by a lot of the claims that Opendoor was making. And in particular, we saw that Opendoor was telling consumers they were going to make more money selling to it, rather than through an open market transaction," said Matthew Wilshire, an attorney with the Federal Trade Commission.
The FTC says the vast majority of home sellers actually made thousands of dollars less than market value. Now, Opendoor is settling the allegations for $62 million.
"It’s going to let us reach out to Opendoor customers and give them back a lot of their money. We’re going to do our best to reach everybody," said Wilshire.
Rice University finance professor Dr. David Zhang says iBuyers can help homeowners sell homes fast and easy, but owners should learn their home's true market value first.
"There’s a study from Stanford that shows that iBuyers generally prices homes 3% to 4% less than market. On a $200,000 home, maybe $6,000 to $8,000 less," said Zhang.
We offered Opendoor an interview. The company referred us to an online statement, reading:
"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. And data shows that our customers value and adopt Opendoor; in fact, we maintain an NPS well over 80 and have maintained a real seller conversion of over 35 percent. 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."
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Green filed a complaint about her experience with the Better Business Bureau.
"I wouldn't recommend them to anyone. I feel like there was a lot of misleading," she said.
Dr. Zhang stresses the importance of learning your home's fair market value before selling.
"It’s important to recognize what the true market value of the home is and think you're sophisticated about it. iBuyer can be a viable alternative. But if you have no idea what the value of your home is, and you can afford to wait. Then, may be worth it to try out the traditional market."
There are five ways to learn your home's fair market value. Some are more specific than others.
One of the more specific ways is to ask a realtor who will consider the neighborhood and your home's features, along with the selling prices of similar homes and other factors. Many will give you a free Comparative Market Analysis or CMA.
You can also hire an appraiser for a very detailed appraisal. This will cost a few hundred dollars.
There are three quick, free ways to get an estimate: using a home value estimator on sites such as Zillow or Realtor.com, checking your county property tax assessment, and checking the Federal Housing Administration's House Price Index. These estimates are based on public records but do not consider your home's unique features.