Open door agreed to pay $62 million to settle Federal Trade Commission charges, which said the company claims it helps people make more money by selling their homes to the company instead. because listing on the open market is a scam.
For many years, the real estate technology company has offer itself such as using its pricing technology to provide “more accurate offers and lower costs,” the FTC said. Such as “iBuyers” uses this method to make quick offers on homes, with enthusiastic claims that sellers will make thousands of dollars more than they would on the open market.
But according to the FTC, that’s not true.
The commission alleges that Opendoor not only offers less than the market value of a home, but also that the company is actually asking sellers to spend more on home repairs that are “higher than what people normally expect.” spent on repairs in a market rebate program”.
The FTC said it would use the $62 million payment to reimburse those affected.
Opendoor solved the situation in a written statement:
While we strongly disagree with the FTC’s allegations, our settlement with the Commission will allow us to address the issue and focus on helping consumers buy, sell, and move around. Transfer simply, securely and quickly.
Importantly, the allegations brought by the FTC relate to activity that occurred between 2017 and 2019 and targeted marketing messages that the company modified years ago. We’re excited to address this issue and look forward to continuing to provide consumers with a modern real estate experience.
The deal is a blow not only to Opendoor but also to the entire iBuying industry, which for years has been based on similar claims. There are several competitors to Opendoor – including incumbent channels associated with traditional resellers, as well as others such as Compass and Redfin (combined, lay off more than 900 workers earlier this year) – also trying to change the old way of doing things. Startups around the world often promote themselves as “Advocates for ___.”
Whether or not the full amount is paid depends on the matter being handled by the Department of Justice, which is responsible for collecting on behalf of the FTC in these matters – as sometimes penalties go unpaid or was significantly reduced.
For its part, Opendoor will go public at the end of December 2020 after its completion merger plan with SPAC Social Capital Hedosophia Holdings II, led by investor Chamath Palihapitiya. The eight-year-old company first offered its shares to the public at $31.47 per share. Today, shares have been traded at $4.78 after hours, just slightly above the company’s 52-week low of $4.30. This means the company is valued at just under $3 billion, down from a valuation of $8 billion in 2021.
When it comes to venture capital, Opendoor last raised $300 million with $3.5 billion pre-valuation in March 2019. Over time, it raised about $1.3 billion in equity and nearly $3 billion in debt to finance its home purchase. Investors in the company include General Atlantic, SoftBank Vision Fund, NEA, Norwest Venture Partners, GV, GGV Capital, Access Technology Ventures, SV Angel and Fifth Wall Ventures, among others.
Founders include Eric Wu and Founders Fund general partner Keith Rabois.
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