FTC Penalizes Property Firm With $62m Over Deceptive Advertising
Online real estate purchase platform Opendoor Labs agreed to pay the Federal Trade Commission a penalty of $62 million to settle claims for deceptive marketing, the New York Times wrote.
Firm convinced property owners to sell for less
The FTC stated in a press release today that Opendoor persuaded people they would sell their homes faster on their site than through an agent, which they did – for way below market value.
The watchdog added that the company had shown sellers charts, which indicated they would make thousands of dollars more by selling their homes on Opendoor in comparison to the conventional marketplace.
Opendoor begs to differ
Opendoor issued a statement on August 1, expressing disagreement with the accusations, which the company claims were connected to business activities going as far back as five years ago. They commented:
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.
Rising inflation pressures housing market
Pressure on the already turbulent real estate market is mounting as consumers struggle to cope with rising inflation, skyrocketing mortgage rates, and declining home prices. Freddie Mac data show the average rate on a 30-year mortgage passed 5% last month, up from below 3% a year earlier.
Property up 20% y/y
In May, real estate property prices rose by more than a fifth year-on-year according to Zillow. Since mortgages started to increase, the market has cooled. Real estate agencies Compass and Redfin announced that they were laying off staff in June due to signs of a “housing downturn” and sinking demand.
iBuying: innovation or a scam?
Opendoor is one of a few companies in the new “iBuying” niche, where businesses apply algorithms to establish a home’s value and purchase it in cash. The niche made up 1% of all home sales in the US in September last year.
Samuel Levine, FTC Consumer Protection Bureau director, declared:
Opendoor promised to revolutionize the real estate market but built its business using old-fashioned deception about how much consumers could earn from selling their homes on the platform.