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

Opendoor has agreed to pay $62 million to settle fees from the Federal Trade Commission, which says the company’s claims that it’s helping people make more money by selling their homes to the company , instead of listing it on the open market, were misleading.

For years, the real estate tech company has touted its pricing technology to provide “more accurate quotes and lower costs,” according to the FTC. Such “iBuyers” use this method to make quick offers on homes, with enthusiastic claims that sellers are making thousands of dollars more than they would on the open market.

But according to the FTC, that wasn’t true.

The commission alleges that Opendoor’s listings were not only below a home’s market value, but that the company actually asked sellers to pay more for repair costs “which were higher than what people typically pay for repairs at a market sale.” would”.

The FTC says it will use the $62 million settlement to issue refunds to those affected.

Opendoor addressed the situation in a written statement:

While we strongly disagree with the FTC’s allegations, our decision to come to terms with the commission will allow us to resolve the matter and focus on helping consumers buy, sell, easily, safely, and quickly and move.

Importantly, the allegations made by the FTC relate to activities that took place between 2017 and 2019 and target marketing messages that the company changed years ago. We are pleased to put this matter behind us and look forward to continuing to provide consumers with a modern real estate experience.

The agreement is a blow not only to Opendoor, but to the entire iBuying industry, which has been making similar claims for years. There are a number of Opendoor’s competitors — including established channels that pull in traditional agents, as well as others like Compass and Redfin (which collectively laid off over 900 employees earlier this year) — who are also trying to change the old way of doing things. Startups around the world often apply to be “Opendoor for ___”.

Whether or not the full settlement amount is paid depends on the matter, which will be enforced by the Department of Justice, which has jurisdiction to collect on behalf of the FTC on these matters — as penalties are sometimes not paid or are significantly reduced.

For its part, Opendoor went public in late December 2020 after completing its proposed merger with SPAC Social Capital Hedosophia Holdings II, led by investor Chamath Palihapitiya. The eight-year-old company initially offered its shares to the public at $31.47 per share. Today, shares traded at $4.78 in after-hours trading, just slightly higher than the company’s 52-week low of $4.30. That means the company is valued at just under $3 billion, compared to a 2021 valuation of $8 billion.

In terms of venture capital, Opendoor last raised $300 million in March 2019 at a preliminary valuation of $3.5 billion. Over time, the company has raised approximately $1.3 billion in equity and nearly $3 billion in debt financing 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 Keith Rabois, General Partners of the Founders Fund.

https://techcrunch.com/2022/08/01/ftc-slams-opendoor-with-62m-settlement-over-false-advertising-claims/ FTC slams Opendoor with $62M settlement over false advertising claims – TechCrunch

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