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

Opendoor has agreed to pay $62 million to settle the costs of the Federal Trade Commission, which says the company’s claims that it helps people make more money by selling their home to a company rather than listing it on the open market are misleading.

For years, the real estate tech company has advertised itself using its pricing technology to offer “more accurate offers and lower costs,” the FTC said. These “iBuyers” use this method to make quick offers on homes, enthusiastically claiming that sellers will make thousands of dollars more than they would on the open market.

But according to the FTC, this was not true.

The commission claims that Opendoor’s bids were not only below market value for the home, but that the company was actually asking sellers to pay more for repairs to the home, “which turned out to be higher than we expected.” sale.”

The FTC says it will use the $62 million settlement to make amends to affected individuals.

Opendoor addressed the situation in a written statement:

While we disagree with the FTC’s assertions, our decision to settle with the Commission will allow us to resolve this issue and focus on helping consumers buy, sell and move with ease, confidence and speed.

It is important to note that the allegations brought by the FTC relate to actions that took place between 2017 and 2019 and targeted marketing messages that the company changed several years ago. We are happy to put this issue behind us and look forward to continuing to provide consumers with a state-of-the-art real estate experience.

The settlement is a blow not only to Opendoor, but to the entire iBuying industry, which has been dealing with such claims for years. Opendoor has a number of competitors, including established channels featuring traditional agents, and others like Compass and Redfin (which collectively laid off more than 900 employees earlier this year) are also trying to change the previous mold. creating things Startups around the world are often advertised as “Open Doors for _“.

Whether the full amount of the settlement is paid depends on whether the matter is handled by the Department of Justice, which is responsible for collecting on behalf of the FTC on these matters, as sometimes fines are not paid or they are significantly reduced.

For its part, Opendoor went public at the end of December 2020 following the completion of a planned merger with SPAC Social Capital Hedosophia Holdings II, led by investor Chamat Palihapitiya. The eight-year-old company offered its shares to the public for the first time at $31.47 per share. The stock traded at $4.78 after hours today, just above the company’s 52-week low of $4.30. This means the company is valued at just under $3 billion, up from an $8 billion valuation in 2021.

In terms of venture capital, Opendoor last raised $300 million at a pre-investment valuation of $3.5 billion in March 2019. Over time, the company has raised about $1.3 billion in equity and nearly $3 billion in debt to fund its home. . purchases. The company’s investors 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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