Headquartered in Tempe, Arizona, Opendoor is a leading company in the real estate industry and reported $8 Billion in revenue for 2021 while running on the services of “making home buying or selling quicker and even more profitable”. As a huge surprise, however, Opendoor recently agreed to the Federal Trade Commission’s charges of deceptive practices for which the punishment has already been decided and accepted. Furthermore, the entire real estate industry can benefit from the lessons to be learned from the Opendoor lawsuit.
The Opendoor lawsuit has stirred up much conversation about the company’s practices. Opendoor’s website states its mission to be “The reimagined way to buy and sell your home”. What they delivered, however, was as Samuel Levine, Director of the FTC’s Bureau of Consumer Protection puts it, “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.”
According to the FTC’s research, using Opendoor’s records and data, Opendoor’s offers were consistently below current market values when making their purchases from consumers and the transaction expenses would have been lower with the practices of a traditional real estate agent. From the (un)biased opinion of a real estate agent, the benefits of a high-quality client-agent relationship will far outweigh any of the perceived “convenience” of buying.
The news broke in early August 2022, that Opendoor accepted the charges of deceptive business practices, and consequentially was fined a whopping $62 Million (to be paid to the FTC). Opendoor also agreed to no longer engage in such deceptive practices, though the information available publically is not very clear on the provisions created to uphold those guidelines. (If you visit Opendoor’s website today there will be no claims of financial benefits to using their services, only slogans on the convenience of iBuying or Selling)
Opendoor’s CEO and co-founder wrote in their 2021 4th quarter shareholder letter a foreboding note to introduce the readers to the report stating, “Looking forward, there are a multitude of reasons why 2022 will define Opendoor”. Little did he know in what ways 2022 would define the company.
Although this is never pretty, stuff like this happens and we can hope that companies learn from this. We can also hope for the best of Opendoor, that they can use the latter half of 2022 to prove to everyone that they deserve their leading spot in the real estate world.
