“Opendoor’s marketing materials included charts comparing their consumers’ net proceeds from selling to Opendoor versus on the market. Those charts almost always showed that consumers would make thousands of dollars more by selling to Opendoor. 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 the company’s offers have been below market value on average and its costs have been higher than what consumers typically pay when using a traditional realtor”
So wait, the FTC now wants everyone to use a REALTOR? #PlotTwist
Opendoor responds…
“While we strongly disagree with the FTC’s allegations, our decision to settle with the Commission will allow us to resolve the matter and focus on helping consumers buy, sell and move with simplicity, certainty and speed.
Importantly, the allegations raised by the FTC are related to activity that occurred between 2017 and 2019 and target marketing messages the company modified 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.”
Not a good look for Opendoor and the timing is terrible, being the week of Inman Connect in Las Vegas. And the fine? Settling a case like this is not unusual, remember when Zillow settled with Move for $130M? There are some hills you don’t want to die on, sometimes it’s just a math exercise.
But, the whole thing is a bit of a head-scratcher to me.
First, Opendoor’s value proposition has always been all about “certainty and convenience”, not you get more money if you sell to Opendoor. In fact, the whole industry narrative around Opendoor (especially in the 2017-2019 time frame) was that iBuyers (including Opendoor) had “low-ball” offers. I mean take a look at Opendoor’s homepage in mid-2017, there is absolutely nothing about how you’ll “make more money” selling to them. Just words like “simple” and “smooth”.
Meanwhile Wall Street has always classified iBuyers as “flippers”. The very definition of a “flipper” is to buy low and sell high, right?
Joe Rand had a funny take on Twitter on all this…
My takeaway is that maybe some aggressive sales tactics got out of control. While this will be fodder for the lobby bar crowd (including me) at ICLV I think Opendoor will take the hit and move on.
iBuying and Opendoor are here to stay.
I’m a Realtor and not a analyst. That said I made this snarky comment yesterday. Since they came on my radar a couple of years back I have commented they would be a niche player at best in the total market.
“I wonder if they’ll be going down the Purplebricks road… Well probably not but that is a sticky wicket.
I don’t know what their national numbers are, but here in the Orange County Los Angeles market. They are at about 2% of all active listings. Not exactly where they expected to be I’m sure.”
That figure regarding active listings as of just a few minutes ago, for Orange County is roughly 2.6% of all active listings in Orange County. Some were predicting they would be at 50% market share – although I don’t recall the timeframe for that prediction. In the total CRMLS system they have about 1.9% of total active listings that I found.
As I said I’m not an analyst. However over the last two years I have done random samplings of what open door would pay for a property and what they would turn around and sell it for. Obviously this has been a crazy-ass market or sellers, good for Opendoor. When I was looking at random samples of their purchase to sale price, they were pretty close to the same price. So they were paying market value where it was possible. That can’t possibly be the case now. There was an agent in our office that took a listing in Garden Grove for $1 million recently. Opendoor was offering $760,000.
So, we shall see. It’s a different market for Opendoor now as it is for all of us. They have earnings coming up. That will be super interesting to watch.
Businesses come and go. The world awaits.
The sector I think has better staying power is the Power-Buyer sector. Roll those dice!!