New corporate filings have revealed that Opendoor, an iBuying giant, is being investigated by the Federal Trade Commission 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 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, the filing stated.
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 of the announcement.
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 the iBuying model was threatened by a suddenly cooling housing market. However, the housing market came roaring back as states began to reopen, which prompted Opendoor and the iBuying model to reemerge. iBuyers can often complete transactions socially distanced.
Opendoor resumed its instant cash offers in all 21 of its 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 iBuyers, which is continuing in the pandemic. From January through June of this year, Opendoor posted a net loss of $118 million.
Source: REALTOR® Magazine