Opendoor, FTC reach $62M settlement over misleading business tactics

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Opendoor FTC settlement overview

• Who: Real estate company Opendoor reached a $62 million agreement with the Federal Trade Commission. 
• Why: The agreement is the result of an FTC investigation into Opendoor’s practice of promising consumers more money by selling to OpenDoor rather than the traditional real estate market. 
• Where: The FTC investigated Opendoor’s actions in the United States. 

Opendoor has reached an agreement with the Federal Trade Commission in which it will pay the commission $62 million and make corporatewide changes to its practices.

The agreement, which was reached Aug. 1, follows an FTC investigation into Opendoor’s practice of promising consumers that they would make more money selling their homes to Opendoor than on the traditional market, when in fact, consumers ended up losing thousands of dollars on these deals. 

For these violations, the agreement orders Opendoor to pay $62 million to the commission within eight days of the order’s effective date. The money “be deposited into a fund administered by the Commission or its designee to be used for relief, including consumer redress and any attendant expenses for the administration of any redress fund,” according to the order. Any money not used from this fund will be deposited to the U.S. Treasury. 

Per the agreement, Opendoor neither admits nor denies any of the allegations made in the initial FTC complaint. 

Opendoor hit with compliance orders

Opendoor must also comply with several requirements outlined in the FTC agreement. 

For one, the company and its officers, agents, employees and attorneys must not misrepresent: that consumers will receive more money than they would using a different good or service; that consumers will save money; that consumers will receive a market-equivalent price for their homes; the amount of repair costs consumers will pay; that consumers will save money on repair costs; that any offer to purchase a consumer’s home is an accurate and unbiased projection of that home’s market value; and that the person or persons offering any good or service do not expect to make money from reselling homes.

Opendoor must not make false representations about the costs associated with listing a home for sale traditionally or the costs, savings, or financial benefits of any real estate service, including its own. 

Opendoor must also submit compliance reports to the commission for at least the next five years, including information about any mergers, sales, or filings for bankruptcy. Through the agreement, it is ordered that the commission can monitor the company’s compliance with the order, even by posing as customers. 

Finally, Opendoor has been ordered to create and retain records for five years that include real estate accounting revenues, personnel records and screen captures of the company’s website. 

What do you think of the FTC’s agreement with Opendoor about its real estate practices? Share your thoughts in the comments section below!

OpenDoor is represented by Rich Cunningham and Olivia Adendorff of Kirkland & Ellis LLP.

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