Earlier today, the Federal Trade Commission (FTC) announced it had reached a settlement with Opendoor (NASDAQ:OPEN) that proposed a $62 million settlement from the Proptech firm. Opendoor has agreed to the order.
According to the FTC, Opendoor promoted its services by information consumers they could receive more money in selling their homes if they used the Opendoor platform. The FTC complaint alleges that the average gain for consumers was $6000.
Unfortunately for OpenDoor, the FTC claims that’s not how worked out for most people and 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.”
FTC alleges that Opendoor sought to reduce the price of the home to offers below its internal valuation system.
To settle the case, Opendoor is expected to pay $62 million, which the FTC states it will use for customer refunds.
The proposed order prohibits misrepresentations about what homeowners will have to pay and requires Opendoor to have appropriate substantiation to support claims about the costs, savings, or financial benefits associated with using its service, including any comparisons to traditional home sales.
Following the FTC’s announcement, Opendoor issued the following statement:
“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.”
Shares in Opendoor declined today along with the broader market. Opendoor closed at around $4.79 a share far off its 52 week high of over $25 a share, in a fast cooling real estate market.