Nearly 2,500 homeowners in California who sold their homes to Opendoor Labs are getting payments from a $62 million settlement after the FTC found they were deceived by the company’s marketing claims.
The Federal Trade Commission’s online settlement tracker says California home sellers are getting a median refund of $1,553 after the company “tricked them into thinking that they could make more money selling their home to Opendoor than on the open market.”
An FTC investigation found that home sellers who used Opendoor actually lost money.
“In reality, most people who sold to Opendoor made thousands of dollars less than they would have made selling their homes using the traditional process, and many paid more in costs than what sellers typically pay,” the FTC said in a statement Wednesday.
The FTC complaint said Opendoor charts marketed to prospective sellers “almost always showed that consumers would make thousands of dollars more by selling to Opendoor.” Instead, sellers spent thousands more on service fees and their home’s market value often “included downward adjustments.”
The premise of Opendoor’s marketing was that homeowners could skip the costs of fixing, listing and showing a home by selling it to Opendoor using an online app instead. The owner would get a cash offer after the company determined the home’s value using its own algorithm. The price would go down after Opendoor evaluated repairs and service fees.
Opendoor was one of several so-called iBuyers that zeroed in on the Southern California housing market a year before the pandemic’s low interest rates would vault prices to record highs. In March 2019, Opendoor, RedfinNow, Offerpad and Zillow Offers brought their substantial backing to sellers, promising a quick way to sell a home with few hassles.
Sales represented a scant 1% of market share in the overall home transactions. By spring 2021, the companies were buying more homes, defying expectations that these online acquisitions would drop during the overheated seller’s market.
Zillow Offers, Opendoor, Offerpad and RedfinNow spent a combined $512 million buying 789 houses in Los Angeles, Orange, Riverside and San Bernardino counties, a study by Zillow found.
Nationwide, homeowners sold more than 15,000 properties to iBuyers that spring for nearly $5.3 billion, the study said.
The settlement with Opendoor:
—prohibits the company from making the deceptive or unsubstantiated claims to consumers about how much money they’ll get or the costs they will have to pay to use its service;
—requires Opendoor to have “competent and reliable evidence” to support claims made about the costs, savings or financial benefits
In the Opendoor settlement, the FTC is sending $4.06 million in payments to 2,472 recipients in California. The distribution comes eight months after the FTC and Opendoor agreed to settle the dispute.
Consumers who have questions about their payment can call the refund administrator, Epiq Systems, at 1-888-546-2054 or reference the FTC’s frequently asked questions about the refund process.
Staff writer Jeff Collins contributed to this report.