FTC takes action to stop Opendoor from cheating potential sellers
ftc.gov
ftc.gov
Their 2021 profit alone was 730 million (on 8 billion revenue).[1]
When the fine is less than 9 percent of one years profit, will they really stop doing what they're doing?
edit: a lot of people are saying the company actually lost money. But, and this is an honest question, is it really 'losing money' when the majority of that loss is "primarily driven by non-cash stock based compensation of $536 million"? Looking at previous compensation tables, it looks like the top four people in the company are earning 100+ million in stocks? Is that what's making the company be considered in the red? [2]
[1]https://investor.opendoor.com/news-releases/news-release-det...
According to your link the company actually lost money. So if the fine should be proportional to the company’s profit, the government should be paying Opendoor?
To me it seems more reasonable to set the penalties at a level that’s high enough to deter violations. To make that calculation, the main inputs should be how much money they can make from the violation and how likely they are to get caught. Other profits the company made that weren’t from fraud are irrelevant. (or in this case, losses, since we are discussing an unprofitable company)
Be the first person in a group of founders to want someone to put something controversial down on paper. I guarantee you. You will get chilled out.
You ask if the folks who depend on the company's product should go without. No, they should move their business to a competitor. If there is no competitor, maybe that's evidence that the business plan is not viable while acting lawfully.
I think a better metric is to look at how many homes Opendoor bought (36908 in 2021), and if possible identify those transactions where some misleading marketing took place (not sure if that's possible), then divide the fine by that much.
Exactly what the FTC is allowed to ask for is a bit convoluted because the law isn't very clearly written. One reading says they can do the common sense thing by demanding profit from illegal conduct be returned and impose punitive damages - especially on repeat offenders, along with imposing penalties for damage done to the overall market. The other reading says they can only ask for money to reimburse specific consumers for specific damages (so as a consumer your time, aggravation, etc are worth $0; damage to your competitors who were operating fairly don't count). And by the more restrictive reading the direct-to-court route only allows them to seek an injunction, no damages.
Unfortunately SCOTUS recently said the FTC is not allowed to seek anything except an injunction via the direct-to-court path and if that case is any indicator it is likely courts will also prohibit punitive damages and profit disgorgement via the administrative route as well. That severely restricts the ability of the FTC to punish companies.
For example a recent case involved DreamCloud mattresses that claimed they were made in the USA with 100% USA materials... when in fact some of their mattresses were pure imports and others were made in the USA of imported materials. Under the new court rulings the FTC has to show how this harmed the purchasers of the mattresses and can only seek money to compensate those consumers for those damages. The FTC can no longer impose penalties for the obviously flagrant conduct, for the harm they did to the overall marketplace, for the harm to competitors (both those who do and do not manufacture in the USA), etc. Anything that doesn't have a directly measurable monetary value is irrelevant. And if DreamCloud does the same thing again it hardly matters because the FTC is limited to the same remedies.
We need Congress to pass an act cleaning up the FTC's enforcement powers.
Which is the constitutional design:
Article 1. Section 1. All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.
Right here:
GP: Exactly what the FTC is allowed to ask for is a bit convoluted because the law isn't very clearly written.
Yes, if they don't want to get an easy reaming by the federal government, because in addition to the cash portion of the settlement, the consent decree includes:
(1) a requirement that they stop making the specific claims that were at issue, and
(2) a requirement that they stop making any financial claims to consumers without “competent and reliable evidence to support” those claims.
That basically means that if they keep doing anything like what was claimed in this case, the FTC gets to treat them like a money piñata without proving a violation of the generally-applicable rules, because they’ve accepted, in a legally-binding way, stricter rules where violations are easier to prove and harder to refute.
The cash payment is almost never the most important part of a settlement with a regulatory agency in terms of preventing similar future abuse by the same company.
I mean, there were several companies providing quick online estimates of house value. I don't see how OpenDoor could have been all that far off the market value, without most people noticing.
Which sometimes there is, sometimes there isn’t.
eBay in particular is full of scam bids, over and under.
I understand your dismay but starting with good numbers is an important part of financial and trade regulation.
The guy is 2/3 on scams... with a good chance of landing 3/3 in due time.
[0]: https://www.linkedin.com/in/kyletibbitts [1]: https://news.ycombinator.com/item?id=30922981 [2]: https://www.wander.com [3]: https://www.wander.com/atlas
Why? It'd drive investment into other avenues, keep commodities cost low, and get more people into houses. The current housing market is stupid.
-A disgruntled millennial who despite great savings can't afford anything
I’m sorry for your experience. I’m Gen X and can’t imagine how frustrating this must be for you.
It worries me that this is just further driving inequality and creating an even greater separation between haves and have-nots
The requirement is $/mo is affordable.
Technically, yes, savings is irrelevant; as long as I can reach the required down-payment it doesn't much matter. It matters a bit in that, if I make a >traditional down payment, I can in theory, start cutting into the $/mo¹. The in practice problem is that my ROI has been outpaced by the housing market's lunacy, and more recently, there's the problem of inflation.
(There's also the other direction, where savings is irrelevant in that you can just ignore the traditional down payment, and like, take PMI or something, but that raises the $/mo problem.)
(Part of me is starting to go "well, but what if we just didn't count some of the cost as a cost per-se, I mean, housing is an investment, amirite? and the prices clearly only go up. (Heavy /s on that.))
Now, look at the current economy: inflation is +9% over the last 12 mo, YTD my investments are something like -18% (though of course, probably… things will get back to normal … any day now… — but that means that your time horizon for home purchasing has to be further out than things returning to normal), and IME eng salaries go down¹ until you inevitably change jobs, and tech companies are laying people off right now (so, it means gauging who you think is in deeper trouble: your current employer or your next employer, and boy do employees not get the kind of data or insight to tell that sort of thing — although after 2 years at a place I think one will know, for that company).
¹more or less. Adjustments for promotions might happen, but in my circle of people, we're not seeing meaningful adjustments for inflation or intra-level bumps.
Can it be done vs do I like the price.
I spent 5 years struggling to figure out the difference when it came to purchasing a house.
Eventually I came to the realization that yes, I can literally afford it. no, I don't like the price. Unfortunately, chances were low I would ever see a price I did like.
What do you mean? Inflation is good for fixed-rate mortgage holders
anywhere ?
I think key to that is to ensure they minimize the amount of time they hold any property. Don't try to make money on the long term movements of the market. Just buy the house at a slight discount by saving on realtor and closing cost fees and do the same on the buy side - turn it around fast, low profit margin, but at national scale.
That could be a recipe for success, but yea they need to be honest that there's no guarantee their offer is better than the open market because you never know. It's up to the seller to make that judgement call. I have many friends who were able to sell quick with Opendoor, full well knowing they were potentially losing some money in exchange for convenience. That's ok if we're all honest about it.
Anyways, looks like they're allowed to sell cars again as it gets figured out. Not shady at all when you actually understand what is going on. Just like this relatively small FTC fine for Opendoor. https://www.fox32chicago.com/news/carvana-can-do-business-in...
A good example study followed pricing when a city set a cap on Payday loans that was higher than the average market rate. Once the cap went into effect, all of the lenders below the cap moved their rates up to the cap.
You see this with Cars & Kelly Blue book as well.
All of these pricing signals skew the market and should be banned.
The issue here wasn't that Opendoor had pricing signals, but rather that they were lying about what those market prices were.
Only if the signals are accurate. Zillow calculates value based on comps in the same zip code since the range of properties in a zip code can vary tremendously. This is ridiculous in many zip codes. Ask any realtor what they think of “Zestimates”. You’ll get an earful.
Aside from the obvious issues with prior restraint, where do you stop? In real estate, a list of comparable sales (comps in RE speak) is commonly used to set an asking price. That list is clearly a pricing signal, would you advocate hiding the sales price of houses?
Ok, now you’ve done that, how does the government assess property taxes? And when they do, are those assessments now secret as well?
You’re going down a really dark and weird road to try to fix a small part of a big problem…
Zestimates and Redfin offers are inflated figures with no basis in reality. They are a derivative of a derivative.
> its costs have been higher than what consumers typically pay when using a traditional realtor
Really?! Beating the seller costs of a traditional realtor in the US is an incredibly low bar. Creating a tech solution that costs even more is absurd.
OpenDoor allegedly came back immediately with "wait wait wait! the other offer actually fell through, so you got the home!"
Pretty sketchy stuff.
Also, because each agent only get a 2.5-3% of the sale, they are not as sensitive to the final selling price as the owner. For example if the house in question was originally offered at $1M, 20% over asking would be $200k. The selling agent would only pocket $5-6k more. Nice to have, but not necessarily enough to risk their reputation.
On the other hand, because OpenDoor is the owner of the property. Negotiating a 20% increase means they pocket the full 20%. So they have a strong incentive to be dishonest here. At the very least, I would expect them to push the law to its limits when trying to negotiate the selling price upwards.
What does the FTC actually do with the money in cases like these? Give it to harmed consumers?
> which is expected to be used for consumer redress
Statistics have shown they sell for lower prices to increase throughput and sales compared to when they sell their own properties…
> In fact, the complaint states, the vast majority of consumers who sold to Opendoor actually lost thousands of dollars compared with selling on the traditional market, because [1]the company’s offers have been below market value on average and [2]its costs have been higher than what consumers typically pay when using a traditional realtor.
My understanding of Opendoor is that their product specifically targets homes in the low to mid range of the price distribution, making it easier for them to have a high-quality prediction on whether acquiring a home can be profitable to them.
for [1] this almost surely means they will be below market on average, since the upper-bound is unconstrained. Home prices follow a log-normal distribution.
[2] sounds worse. A typical agent-driven transaction is between 4.5% and 6% of the sale price. For Opendoor to be pocketing _more_ than this is a pretty bad value prop. However, even granting that this is the case -- there is some premium that certain home sellers may place on just washing their hands of the whole process, handing their keys to Opendoor and getting a check next week. That seems fine to me, but not if Opendoor are claiming otherwise.
Which is completely ridiculous.
Fees should instead be a fixed amount relative to the cost of marketing the home, holding open houses, and all the other legwork to sell a home.
No other job has this kind of royalty payment except publishing (books, music, etc).
There are plenty of markets that averaged monthly price increases in that order of magnitude. My city, as an example, is up 71% over 5 years. So a 300k house became a 510k one over 60 months. An average of 3.5k per month. Couple of those years saw 20% growth.
It's been well known that this was the only thing keeping the iBuyers alive. They weren't great at pricing but it didn't really matter much. If they were off 5%, well wait 3 months and now you're right.
It also matches the anecdotal data. Plenty of people reported getting offers from Opendoor for more than what agents were telling them they could sell for. Obviously these people sold to Opendoor while those that got lowballed declined. If you only count the latter and ignore the overpayments then yes obviously it looks like Opendoor was consistently low balling people.
The complaint [0] which preceded the settlement laid out the detailed narrative of specific steps Opendoor took to reduce it's offers based on its own internal estimate of market prices, and Opendoor’s own internal analyses of it's offered prices (separately on accepted and customer rejected offers) being below market value.
So Opendoor already did that work for the FTC.
[0] pdf: https://www.ftc.gov/system/files/ftc_gov/pdf/Complaint%20%28...
If Opendoor is paying more than what you'd get in the open market, where are they going to make the money from? Aren't they going to lose money on every deal then?
There's the old adage: if it sounds too good to be true, it usually is.
I work in the space -- I'll be using this. Thanks for the encapsulation!
“Brazenly breaking the law in a way that probably won't get cracked down on until after we’ve made a profitable exit” doesn't seem to business model VCs are at all loathe to fund.
If you don't come from a wealthy family you need to get at least a 30 year loan. The moment you get a 30 year loan you have enormous pressure to generate income every month and will accept non ideal conditions. Essentially, by getting debt you lose leverage.
I bought a house recently and according to Zillow, I'm technically up about 10% of the purchase price just 18 months later.
In practice it seems like something isn't properly hedged so Opendoor and a lot of other iBuyers are exposed to the underlying asset rather than just capturing the spread and picking off incorrectly priced homes. That's why you see their margins go up when housing does well and down when housing does poorly. A proper market maker should have no exposure to the underlying (e.g. market makers made record profits in 2020 despite equities tanking). I bet if a Wall Street quant firm came in they'd roll over Opendoor and the like.
I bet the best performing and consistent market makers have a sense of the uncertainty of the direction
Some might say that they are not doing very good.
Obviously the other person on the opposite side of that trade is doing very good.
Isn’t that what every real estate agent claims ?
“To settle the FTC’s charges that the company’s claims were deceptive, Opendoor has agreed to pay $62 million, which the FTC will use for refunds to people who were affected.”
Closing the door on home buying company Opendoor’s false claims
https://consumer.ftc.gov/consumer-alerts/2022/08/closing-doo...
.
Update: Sorry, I can't change the URL since it has been over an hour long since I made the original post. Changing the headline alone would be confusing/misleading.
Serious question: why are businesses like this allowed to continue after getting caught lying to prospective customers? These founders should be dragged into court and ruined over this. No excuse for this kind of behavior.
1. They claim that their ability to make an all-cash offer on your current house allows you to turn around quicker to make an offer on another home without struggling through a ton of financing issues.
2. They claim that once they've purchased the home, they will assume all responsibility for repairs and cleaning.
3. They claim that in the event that the company sells the home for greater than the estimated value, they will give you the difference.
None of these are bad. But if someone came to you and told you that they'd sell you the home for cash and take a little bit more off the top for inspection / repairs, I think that mortgages are so long that some people would rather do that than deal with all the headaches otherwise.
This isn't a game. We all need a place to live. We all share this planet.
We won't be able to do that anymore when all of the habitable land is owned by the 0.1% of plutocrats.
Lets face it though - there's a separate problem and it is pretty simple - we just need more housing in places where the demand is high. Personally I think it would be especially helpful in the short term if there were big incentives for individuals to ADU's or inlaw units and things like duplexes, triplexes, or "bungalows" on one property. Easy sell for the public and would open up all of the single family home zones to much more housing and maybe even incentivize families across generations to live together again.
https://www.theglobeandmail.com/opinion/editorials/article-a... seems to say 2-6%
https://blog.remax.ca/are-foreign-buyers-still-purchasing-va... says 1.4% in 2020.
https://www.fortunebuilders.com/one-third-of-vancouvers-real...
https://www2.gov.bc.ca/gov/content/taxes/property-taxes/prop...
I'm glad I got her out of there 2 years ago. The rising crime problem there was the motivating factor.
His job is to act as a scout and local broker for corporations that buy up residential properties, then turn them into rentals.
He makes great money. Most of his work is in "distressed" areas. Many NIMBY neighborhoods don't like rentals, but poorer sections of the county don't fight it, and may even welcome it.
I'm of two minds about his work. On one hand, John Oliver did a big segment, roasting corporate rentals[0], but I have also seen local slumlords treat renters like garbage (I actually rented from one, at the start of my career, and can attest to that).
The current real estate "market" is certainly far from a "free market". If we live restrictions on supply, by removing things like: - Minimum parking requirements - Maximum height requirements - Aesthetic requirements
There are also demand-side subsidies for home ownership that make it more expensive, such as the mortgage tax credit.
A land value tax is another way to encourage people to improve the land. https://localhousingsolutions.org/housing-policy-library/lan....
I agree we can't have real estate be both a great investment (increase faster than inflation) and affordable (decrease on inflation adjusted basis). I think adopting more of a free market here would really improve things for everyone.
Note: I also think congestion pricing + eliminating free parking would solve many of the related problems to this issue, and are important parts of a solution.
Right now, private builders can bribe people to allow construction if the market price is high enough. If the government had to do it, there would be basically no new construction. It's politically unpopular and very expensive, so it's an easy project to axe.
Why is real estate being an investment vehicle required for builders to make money?
This is because they are very useful.
A house or an apartment is also quite useful without being an asset that appreciates in value. The whole rental market is based on this concept.
I don't see why housing needs to increase in value to incentives people to build it.
And in Japan this is exactly the case, it's not typical for housing to increase in value in Japan.
Cars are an example of that. Even when scarcity has driven the cost of cars up (such as during the recent pandemic), everyone recognized that more could, and would, be produced, and so no one viewed them as an investment vehicle, that adding time in somehow increased the value over the initial purchase price.
Housing is viewed that way. Part of that is due to location; there is innately a level of scarcity (not everyone can live in (insert city)), but there is also massive artifical scarcity. Even where there's room, there is NIMPYism and zoning regulations and etc that keeps enough housing from being built in areas people are able to live (i.e., close enough to civilization to be able to buy groceries without an hour long drive each way, for instance), forcing pricing up, in a positive reinforcement loop (scarcity = pricing goes up = people buying for the 'investment' rather than a place to live = more scarcity)
The other thing about building a home - particularly if you're in a high-demand area, the appreciation in the first 2 years is pretty insane.
You can certainly buy an existing home without HOA.
In America, this is basically the ONLY way "normal people" can make money (or at least used to be - those of us who didn't "get on the bus" in time have missed out).
Unless you create valuable intellectual property (ie. inventor, etc), or unless you're a doctor or lawyer, you're mostly just barely getting by. Those of us who were able to invest in housing, and take that ride, might actually have enough economic security to retire on.
So why does it have to be that way?
Because the politician who tries to change this system, will get voted out of office.
I don't want to say bad things about democracy. I love democracy, and I think it's one of the most important human innovations of the past 2000 years.
But the way we practice it in the USA; we're basically voting for our own extinction.
But it's not a fundamental property of how markets for housing have to work. Housing doesn't need to be an appreciating asset for building housing to be a viable business to be in.
Similarly, why aren't houses just a thing that costs a bit more than the bricks and labor required to make them?
Because words like "housing" and "houses" in conversational speech hides the fact that it has 2 major components: (1) land and (2) the building structure
The big part of rising housing prices or "scarce housing" or "demand exceeding supply" is really about desirable geographic locations.
Sure, raw materials prices like lumber and copper pipes go up in price too but it's also the rising land value that's contributing to the "return on investment". That's the component price that doesn't work like food commodities. My home is decades old and has outdated technology that today's brand new homes have upgraded but nevertheless, my so-called "house" has tripled in value because a new hospital down the street was built 10 years ago and all the doctors want to live in my neighborhood to have a short 10-minute commute. If someone actually bought my so-called "house", they may bulldoze it and rebuild a new more modern home on it.
Only to a point. Many desirable geographic locations have a lot of local factors that prevent additional housing from being built with the intent of housing more people (think homeowners defending their "property values", zoning laws, etc). Similarly, homes being "investments" means there's a self-perpetuating cycle; builders build luxury homes instead of multi-tenant buildings, because they know that's what companies want to buy (being flipped the easiest with the highest rate of return), so even when there is new land being developed, market forces push it to being an "investment" rather than housing people. Income inequality furthers this; why use the land and sell a modest home to a worker, when you could use the home and sell a luxury home at a much larger markup to the rich?
It's like a sink that eats up economic gains.
A builder is paid to build. They profit if their revenue is greater than their costs. That is certainly possible even if housing isn’t an investment vehicle.
The makers of candy bars manage to profit yet I doubt many people buy them as investments.
What in my post doesn’t apply for developers exactly? They finance construction if they expect to profit. They can profit even if the final product later doesn’t increase in value. In fact, why would they see that profit anyway? Any increase in value would end up in the final owner’s pocket not the developer.
Buying/building property to rent should absolutely be a thing as well. There's a service there. But the idea that i buy a house now and in 5 years it's worth more than i paid for it (relative to income) needs to die
You don't really need to. Do what Singapore (or Vienna) did. Create a Housing and Development board, build the housing that you need... and that's about it.
These bizarre contortions that people go through of schemes and tax credits and mechanisms, it's the same as the healthcare sector, one single bloated mess.
https://tribunemag.co.uk/2022/07/germany-mietshauser-syndika...
I very strongly suggest reading through citations of https://en.wikipedia.org/wiki/Subsidized_housing_in_the_Unit....
tl;dr: "The Projects" were primarily concentrated outside of major economic centers, were left out of public transportation (and other) infrastructure projects. Mix in the government sanctioned racism and segregation of economic groups, "The Projects" in the US were doomed before they even started.
https://charterforcompassion.org/shareable-community-ideas/p...
Unless you can explain how that's different from what the Warsaw Pact did, or show that the Warsaw Pact housing, while horrible, was still better than what the free market would produce, then I'm not going to sign up for your solution.
Personal attacks are not cool here.
> ... because otherwise you'd make the trivial effort required to discover that Vienna or Singapore do not look like the Warsaw Pact.
I know they don't look like the Warsaw Pact. But the policy that Barrin92 is proposing sounds like Vienna, but also sounds like the Warsaw Pact. In one place it works; in one place it produced monstrosities.
My question is: If we adopt this policy, why do we think we're going to get Vienna's outcome instead of the Warsaw Pact's?
I'll go one further and tell you there is no such thing as free market housing and never has been, just like there's no free market submarine or free market interstate highway. These are big governmental and corporate projects and at best the market shuffles the occupants around after the fact. Every project like that is communist even in the good old US of A, just don't run the entire country that way and you're golden.
[Edit: There are submarines that are free market, and are for sale to (wealthy) private individuals. There are also free market interstate highways; they are toll roads. Still official interstate highways, but privately owned and operated.]
Demonstrably false. The city of Venna Austria builds housing for people because people need housing, not because it expects to make money. This kind of thinking demonstrates a depressingly narrow view of human possibilities.
https://www.huduser.gov/portal/pdredge/pdr_edge_featd_articl...
That's not a lot of housing production for a city of 2 million.
“Vienna’s city government owns and manages 220,000 housing units, which represent about 25 percent of the city’s housing stock.1 These city-owned housing units, called social housing, are meant primarily for lower-income residents. The city also indirectly controls 200,000 units that are built and owned by limited-profit private developers but developed through a city-regulated process.”
So according to this data the government controls about 50% of the housing in the city. Seems pretty good to me! As someone else said the article and data are a bit old, but it sounds like they’ve been keeping up with demand if they had 50% when this article was written. (They’ve been doing this for 100 years)
This is orthogonal to the investment value of the apartment building as an asset. Surely you generally build rental properties to make a profit via rent, not to make a profit on the land & building - thought you'll factor that into your models.
As a homebuyer in the past year I can personally attest that of the 4 realtors I dealt with, not a single one felt inclined to show a "Owned by Zillow" home. In all showings they were poorly maintained and prepped. It *felt* like an abandoned home.
Lol what? They are literally a buyer and then a seller for a house. So yes they are competing with other buyers and sellers.
They literally are, by acting as both a buyer and a seller.
Their publicly claimed business model was that that is incidental, and that they are really a fee-based facilitator, but... that also apparently was knowing fraud, so, maybe it shouldn't be given much weight.
- Tax empty houses a REALLY high amount after a month of occupancy loss. This puts extremely high pressure to get the house sold after the month. Living in your house while you sell it? No penalties.
- Make renting a house extremely painful for landlords. Renting can be replaced with new forms of community ownership - communities that own X properties in many cities and people can swap (for job relocation and other things). The Landlord business IS the oldest rent-seeking business. Buy a property, rent it out, pay nothing on it for 30 years and at the end of that - it's yours. In my opinion that should be illegal. People that disagree are landlords and people that think renting is the only way. Invent new ways to do short term house ownership. This is the startup capital of the world (HN).
- Require unused office space to become homeless shelters if unused after 6 months. Government will pay for the lease at a fixed maximum price. Get your shit leased or house the homeless.
The jist of this is that if we did things like this, we would probably have no homeless, the price of homes would come down, and everyone would have a home. In fact we would have such a huge surplus of homes, most people would be able to easily upgrade.
given that more than 95% of homes are currently occupied we would not have a surplus. while some of your suggestions could have a place there is no replacement for building more homes
The homeownership rate in the US has actually stayed surprisingly constant over time, it's fluctuated between about 62% and 69% since the mid 1960's and is now around 65% [0]. We've got quite a long way to go to 0.1%.
[0] https://tradingeconomics.com/united-states/home-ownership-ra...
If you truly believe that you should have a right, you’ll have to fight for it. Posting on HN calling for a ban isn’t going to cut it. You’ll have to put an end to it and enforce it. Just like they do when they want something.
The next thing we’re going to learn is that there really isn’t someone coming in later who’s super interested in the used Honda.
This seems overly nannyish.
> According to the FTC, Opendoor said it would pay market value for people’s homes while saving them money on costs. That way, people selling their homes would make thousands of dollars more than they would on the open market. But, the FTC says, it wasn’t true.
Actual dystopian vibes.
OpenDoor was reportedly making several false claims, including "we make money from fees (and not by immediately reselling your house for a profit because we bought it below market value)" or "we charge about the same in repair costs as you'd pay on the open market" or "we buy your house at market value (and not intentionally below what we think is market value)."
I'm sure they could have proven all those claims. They could have said "Last year we made $XX Million from fees". Sounds like a big number, but might still have only been tiny compared to market movements.
They could have said "we charge about the same in repair costs as you'd pay on the open market" by just finding one quote from a builder to back it up.
They could have said "we buy your house at market value" by just having a model of market value which tended to lowball valuations - rather than having an accurate model and then putting a " * 0.9" on the output of the model. One way to do that for example would be to build the model on historic data, and ignore the fact that house prices are at all time highs right now. And house prices have been the 'highest ever' for nearly every year in the past 200 years.
It goes beyond lack of data and well into fraud (knowing deception).
See, for example, point 34 of the report:
>Opendoor has used an automated system to generate expected market values for homes. In many instances, Opendoor’s employees have manually adjusted these values before presenting them to consumers as offers. Opendoor’s internal analyses showed that these manually adjusted offers were several percentage points below Opendoor’s assessment of market value. Beginning later than 2019, Opendoor instituted a policy to reduce its manually adjusted offers to [REDACTED] below what Opendoor assessed as market value.
In other words, they’re promising above-market value while actually quoting below even their OWN estimation of market value (which is undoubtedly revised down)
"Keeping sufficient evidence that they were true" implies that the claims were true, which they presumably were not if OpenDoor agreed to a settlement.
I'm sympathetic to Opendoor on this. Are they counting ALL the costs when they say Opendoor customers "lost thousands"?
- Are they counting the carry of keeping [a potentially empty house] on the market for months? (e.g., real estate taxes, maintenance fees)
- Are they counting the 4-6% real estate real estate commission the agent would take that Opendoor customers arent paying? If I sell the house at a 20k discount to Opendoor, but save a $40k real estate commission, that sounds like a good deal.
That's the issue.
If they were literally "promising" more money, that would be a big issue. When I saw Opendoor, it seemed to essentially be a Market Order for home selling. The promise was immediacy and the trade-off was lower-price. However, the immediacy also carried savings w/r/t not having to carry the property costs. So it could actually end up being a better deal to sell immediately depending on carry costs. I was just sad to see such a thin letter lacking details.
your overall point stands, but Opendoor does have a 5% "service charge" that's on par with an agent commission.
> Instead, the FTC says Opendoor’s offers were lower than a home’s market value, and the company asked sellers to pay for home repair costs that were higher than what people would typically spend on repairs in a market sale.
FTC Website:
> Consumers likely would have paid the same amount in repair costs whether they sold their home through Opendoor or traditional sales
Those aren't the same
You're paying for convenience, and while I didn't find the opendoor written offers completely confusing, it did seem a little... misdirection-y.
The letter, which I quoted on my comment, was pretty clear on the trade-offs or iBuy vs traditional. You're trading dollars for upfront pricing, immediacy, and certainty. The letters doesn't mention anything about that. The letter acts as if "price" is the only cost, but in real life there are many costs include hidden costs like carry.
I'm also saying that the US regulatory apparatus right now is very strange and openly antagonistic to tech firms while turning a blind eye to traditional businesses are often may be far more extractive.
Example 1: We're told WhatsApp is "bad" because supposedly competition. Except as a consumer, it costs me nothing, has no 2-yr plans, no mystery fees, no $90/mo bill. On the other hand, the same regulators wont say anything to a mobile phone company.
source: https://www.redfin.com/blog/how-much-does-it-cost-to-sell-a-...
If that was the case then OpenDoor wouldn't have "asked sellers to pay for home repair costs that were higher than what people would typically spend on repairs in a market sale".
That's not my definition of "as-is", is it yours?
This seems fair to me, there is no guarantee that when selling a home on the market, buyers wont similarly ask for repairs or dollar concessions for repairs.
I got 3 offers from opendoor over about an 18 period. We were on the fence about moving, and explored opendoor and Zillow house buying, to save us some hassle. The offers were easy to see that they were lower than 'market'. Part of what you're paying for is convenience and timing. Is it worth it to me to 'lose' $10k off what I might make in the 'open market' if it means I know for sure the house will be sold on a certain date? IIRC, also, one of those companies offered some discount on their fees if you were buying another one of their houses in their portfolio.
What I did see in our area (slightly rural area) was a year or so of buyers like opendoor coming in with offers fairly low, then flipping and reselling, and making that spread, but fairly quickly. A $300k house they might have picked up for $270k then flipped 2-3 months later for $340k.
Even this may or may not be fair. If the flipper did tens of thousands in repairs, perhaps the extra price is now justified? Any idea of the homes were flipped as-is or after value-add updates?
https://www.ftc.gov/system/files/ftc_gov/pdf/Complaint%20%28...
I'm saying the FTC letter, which i quoted, is very vague and offers no clear argument nor addresses the tradeoffs.
Its like complaining about stock brokerage MARKET orders that hit the ASK PRICE and then saying you could have gotten a better price with a LIMIT order (though then you may not get an executed order at all...)