FTC Investigating Opendoor for Its Advertising Practices
According to Opendoor docs, the FTC sent a civil investigative demand related to “statements pertaining to Opendoor’s offers reflecting or being based on market prices.”
NEW YORK – New corporate filings revealed that Opendoor, an iBuying giant, is being investigated by the Federal Trade Commission (FTC) over its advertising practices and how it presents real estate offerings to customers.
The investigation was contained in Opendoor’s S-4 statement, which revealed that it would be going public through a merger with Social Capital Hedosophia Holdings Corp. II. That federal filing also revealed a 2019 civil investigative demand.
The filing states: “In August 2019, the FTC sent a civil investigative demand to Opendoor seeking documents and information relating primarily to statements in the company’s advertising and website comparing Opendoor’s offers to purchase homes to selling in a traditional manner using an agent and statements pertaining to Opendoor’s offers reflecting or being based on market prices.”
The investigation is ongoing, according to the S-4 statement.
In mid-September, Opendoor announced that it would become a public company through a merger with Social Capital Hedosophia Holdings Corp. II. “This is one of many milestones towards our mission and will help us accelerate the path towards building the digital one-stop shop to move,” Eric Wu, co-founder and CEO of Opendoor, told TechCrunch at the time.
Opendoor makes instant cash offers to home sellers who wish to bypass the traditional route for selling, often for the sake of a quicker sale. Homeowners tend to pay more in commission for the convenience.
As the COVID-19 outbreak hit in the U.S. this spring, Opendoor, like many other iBuyers, paused operations. At the time, Opendoor announced plans to lay off 35% of its staff as a cooling housing market threatened the iBuying model.
However, the housing market came roaring back as states began to reopen, prompting Opendoor and other iBuyers to reemerge, in part because iBuyers can often complete transactions socially distanced. Opendoor resumed its instant cash offers in its 21 markets by mid-August.
“We are just scratching the surface today,” Opendoor said in its filing, as reported by HousingWire. “We believe we have a massive opportunity to expand our reach to the top 100 markets in the United States.”
Opendoor sold more than 8,000 homes last year and generated $4.7 billion in revenue, according to the company.
Profitability, however, continues to be a struggle for iBuyer businesses. From January through June of this year, Opendoor posted a net loss of $118 million.
Source: “Opendoor Discloses That It’s Under Federal Investigation,” HousingWire (Oct. 6, 2020)
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