[HN Gopher] FTC takes action to stop Opendoor from cheating pote...
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       FTC takes action to stop Opendoor from cheating potential sellers
        
       Author : tareqak
       Score  : 181 points
       Date   : 2022-08-01 19:40 UTC (3 hours ago)
        
 (HTM) web link (www.ftc.gov)
 (TXT) w3m dump (www.ftc.gov)
        
       | daoist_shaman wrote:
       | We desperately need a ban on real estate being used as an
       | investment vehicle.
       | 
       | This isn't a game. We all need a place to live. We all share this
       | planet.
       | 
       | We won't be able to do that anymore when all of the habitable
       | land is owned by the 0.1% of plutocrats.
        
         | candiddevmike wrote:
         | Shelter should be a human right. Everyone who needs housing
         | should be able to get an apartment, for free, and landlords
         | should have to compete against free by offering better places
         | with nicer amenities.
        
           | endisneigh wrote:
           | this must be sarcasm, lol
        
         | gnopgnip wrote:
         | Open door is trying to replace realtors, providing a
         | "better"service as a real estate broker. They aren't competing
         | with buyers or sellers, they aren't going to own homes long
         | term
        
           | theduder99 wrote:
           | yet. remember what happened when zillow got greedy and
           | started to expand into home buying.
        
             | no-dr-onboard wrote:
             | I'm not sure where the argument is going with this one, but
             | Zillow did poorly for a variety of reasons. They bought at
             | low prices hoping to sell high and tanked their business
             | (Owned By Zillow, not the site). Homes owned by Zillow
             | stayed on the market _significantly_ longer than their
             | traditionally held counterparts.
             | 
             | As a homebuyer in the past year I can personally attest
             | that of the 4 realtors I dealt with, not a single one felt
             | inclined to show a "Owned by Zillow" home. In all showings
             | they were poorly maintained and prepped. It *felt* like an
             | abandoned home.
        
           | newfonewhodis wrote:
           | > They aren't competing with buyers or sellers
           | 
           | Lol what? They are literally a buyer and then a seller for a
           | house. So yes they are competing with other buyers and
           | sellers.
        
           | dragonwriter wrote:
           | > They aren't competing with buyers or sellers
           | 
           | They literally are, by acting as both a buyer and a seller.
           | 
           | Their publicly claimed business model was that that is
           | incidental, and that they are really a fee-based facilitator,
           | but... that also apparently was knowing fraud, so, maybe it
           | shouldn't be given much weight.
        
         | cactus2093 wrote:
         | > We won't be able to do that anymore when all of the habitable
         | land is owned by the 0.1% of plutocrats.
         | 
         | The homeownership rate in the US has actually stayed
         | surprisingly constant over time, it's fluctuated between about
         | 62% and 69% since the mid 1960's and is now around 65% [0].
         | We've got quite a long way to go to 0.1%.
         | 
         | [0] https://tradingeconomics.com/united-states/home-ownership-
         | ra...
        
         | namdnay wrote:
         | the problem is that the majority of active voters are using
         | real estate as an investment vehicle. convincing an investor in
         | X to ban investment in X is pretty tricky ...
        
           | bonestamp2 wrote:
           | You're right, but I assume there would be an exemption for
           | the home you live in. That would be a great exemption too
           | since it might be incentive for people to subdivide their
           | home to create more dwellings.
        
           | Melatonic wrote:
           | That can be a very different scenario though - a family using
           | one (or even multiple) properties as investment vehicles that
           | they are themselves residing in (even if its just part of the
           | year) does not seem unethical at all to me. Foreign investors
           | who are not planning to even live on the property nor rent it
           | out at all? Definitely a crapshoot. It is a small overall
           | percentage of the pie but every bit counts. And giant
           | corporations scooping up tons of single family homes and
           | small apartment complexes is maybe even scarier.
           | 
           | Lets face it though - there's a separate problem and it is
           | pretty simple - we just need more housing in places where the
           | demand is high. Personally I think it would be especially
           | helpful in the short term if there were big incentives for
           | individuals to ADU's or inlaw units and things like duplexes,
           | triplexes, or "bungalows" on one property. Easy sell for the
           | public and would open up all of the single family home zones
           | to much more housing and maybe even incentivize families
           | across generations to live together again.
        
             | dapids wrote:
             | a small overall percentage? More than one third of
             | Vancouver Canada's real-estate is foreign owned.
        
               | umeshunni wrote:
               | That sounds exaggerated.
               | 
               | https://www.theglobeandmail.com/opinion/editorials/articl
               | e-a... seems to say 2-6%
               | 
               | https://blog.remax.ca/are-foreign-buyers-still-
               | purchasing-va... says 1.4% in 2020.
        
               | dapids wrote:
               | As someone who lives in Vancouver, its quite a different
               | story, and most of those I know, really don't understand
               | where these stats come from. There is not a week that
               | goes by I have someone knocking on the door of our family
               | home asking to buy it. There are four owners left on our
               | street that are the original owners, the rest are
               | vacation homes for Chinese, and completely vacant. This
               | is far from exaggerated.
               | 
               | https://www.fortunebuilders.com/one-third-of-vancouvers-
               | real...
               | 
               | https://www2.gov.bc.ca/gov/content/taxes/property-
               | taxes/prop...
        
         | pessimizer wrote:
         | Oh, we'll still live in the same places, it's just the rents
         | will float to as high as they have to be to deplete our
         | disposable income and put us into debt.
        
           | ChrisMarshallNY wrote:
           | I have a friend that is a real estate broker.
           | 
           | His job is to act as a scout and local broker for
           | corporations that buy up residential properties, then turn
           | them into rentals.
           | 
           | He makes _great_ money. Most of his work is in  "distressed"
           | areas. Many NIMBY neighborhoods don't like rentals, but
           | poorer sections of the county don't fight it, and may even
           | welcome it.
           | 
           | I'm of two minds about his work. On one hand, John Oliver did
           | a big segment, roasting corporate rentals[0], but I have also
           | seen local slumlords treat renters like garbage (I actually
           | rented from one, at the start of my career, and can attest to
           | that).
           | 
           | [0] https://www.youtube.com/watch?v=L4qmDnYli2E
        
         | planarhobbit wrote:
         | Correct. We do not all share this planet. You're lucky the
         | plutocrats haven't put you against the wall and shot you but
         | they simply don't think you're worth the effort to dispose of.
         | The moment that effort is decreased enough such that your
         | presence and being is more burden than worthwhile, you will be
         | put out of your misery.
         | 
         | If you truly believe that you should have a right, you'll have
         | to fight for it. Posting on HN calling for a ban isn't going to
         | cut it. You'll have to put an end to it and enforce it. Just
         | like they do when they want something.
        
         | coding123 wrote:
         | I don't think that's possible, but there are things we can do:
         | 
         | - Tax empty houses a REALLY high amount after a month of
         | occupancy loss. This puts extremely high pressure to get the
         | house sold after the month. Living in your house while you sell
         | it? No penalties.
         | 
         | - Make renting a house extremely painful for landlords. Renting
         | can be replaced with new forms of community ownership -
         | communities that own X properties in many cities and people can
         | swap (for job relocation and other things). The Landlord
         | business IS the oldest rent-seeking business. Buy a property,
         | rent it out, pay nothing on it for 30 years and at the end of
         | that - it's yours. In my opinion that should be illegal. People
         | that disagree are landlords and people that think renting is
         | the only way. Invent new ways to do short term house ownership.
         | This is the startup capital of the world (HN).
         | 
         | - Require unused office space to become homeless shelters if
         | unused after 6 months. Government will pay for the lease at a
         | fixed maximum price. Get your shit leased or house the
         | homeless.
         | 
         | The jist of this is that if we did things like this, we would
         | probably have no homeless, the price of homes would come down,
         | and everyone would have a home. In fact we would have such a
         | huge surplus of homes, most people would be able to easily
         | upgrade.
        
           | scarby2 wrote:
           | > In fact we would have such a huge surplus of homes, most
           | people would be able to easily upgrade.
           | 
           | given that more than 95% of homes are currently occupied we
           | would not have a surplus. while some of your suggestions
           | could have a place there is no replacement for building more
           | homes
        
           | plasticchris wrote:
           | On taxing empty houses - I once had an opportunity which
           | required me to move across the country and my old house sat
           | vacant for months despite pricing it pretty low (when you are
           | 2k miles away it is hard to sell something), and a tax
           | combined with the state laws preventing me from giving it to
           | the bank would have been a perfect storm of misery despite my
           | desire to let someone else live there.
        
         | SnowHill9902 wrote:
         | Investors can provide liquidity and dampening to an otherwise
         | relatively slow market.
        
           | nanidin wrote:
           | They provide liquidity, but further slow the market if they
           | turn it into a rental with ROI targets.
        
         | api wrote:
         | The problem is that the instant you sign a mortgage you become
         | a real estate investor.
        
         | mchusma wrote:
         | There are many good reasons for real estate to be an investment
         | vehicle. You won't convince someone to build a new apartment
         | building if they can't make money. In fact, we really really
         | want people to build more, better housing.
         | 
         | The current real estate "market" is certainly far from a "free
         | market". If we live restrictions on supply, by removing things
         | like: - Minimum parking requirements - Maximum height
         | requirements - Aesthetic requirements
         | 
         | There are also demand-side subsidies for home ownership that
         | make it more expensive, such as the mortgage tax credit.
         | 
         | A land value tax is another way to encourage people to improve
         | the land. https://localhousingsolutions.org/housing-policy-
         | library/lan....
         | 
         | I agree we can't have real estate be both a great investment
         | (increase faster than inflation) and affordable (decrease on
         | inflation adjusted basis). I think adopting more of a free
         | market here would really improve things for everyone.
         | 
         | Note: I also think congestion pricing + eliminating free
         | parking would solve many of the related problems to this issue,
         | and are important parts of a solution.
        
           | miguelazo wrote:
           | In more civilized countries, plenty of housing stock is built
           | by the government, which is why it is not treated as an
           | investment commodity for speculation.
        
             | Plasmoid wrote:
             | The problem is people hate new housing. Until you change
             | public perception of this relegating this to the government
             | is going to make the situation worse.
             | 
             | Right now, private builders can bribe people to allow
             | construction if the market price is high enough. If the
             | government had to do it, there would be basically no new
             | construction. It's politically unpopular and very
             | expensive, so it's an easy project to axe.
        
             | colinmhayes wrote:
             | The land is the investment here, not the building.
             | Buildings generally go down in value over time, just like
             | most other things. It's the land that's gets more expensive
             | as demand increases but supply doesn't change.
        
               | roflyear wrote:
               | Correct. It is hard to make more land.
        
           | [deleted]
        
           | CogitoCogito wrote:
           | > There are many good reasons for real estate to be an
           | investment vehicle. You won't convince someone to build a new
           | apartment building if they can't make money.
           | 
           | Why is real estate being an investment vehicle required for
           | builders to make money?
        
             | bragr wrote:
             | Because you need them to outlay capital now in return for
             | likely future profits? That's literally what investing is.
        
               | kelp wrote:
               | Companies make cars, people buy them, everyone knows that
               | a car is a depreciating asset (except for current used
               | car shortages, and certain collectible classics) but
               | people still buy them.
               | 
               | This is because they are very useful.
               | 
               | A house or an apartment is also quite useful without
               | being an asset that appreciates in value. The whole
               | rental market is based on this concept.
               | 
               | I don't see why housing needs to increase in value to
               | incentives people to build it.
               | 
               | And in Japan this is exactly the case, it's not typical
               | for housing to increase in value in Japan.
        
               | NovemberWhiskey wrote:
               | This seems to miss the point. Within this metaphor, the
               | companies that make the cars are the construction and
               | real estate developers - both of which are driven by the
               | profit motive.
        
               | lostcolony wrote:
               | You can have a profit motive driving behavior without
               | something being an investment vehicle.
               | 
               | Cars are an example of that. Even when scarcity has
               | driven the cost of cars up (such as during the recent
               | pandemic), everyone recognized that more could, and
               | would, be produced, and so no one viewed them as an
               | investment vehicle, that adding time in somehow increased
               | the value over the initial purchase price.
               | 
               | Housing is viewed that way. Part of that is due to
               | location; there is innately a level of scarcity (not
               | everyone can live in (insert city)), but there is also
               | massive artifical scarcity. Even where there's room,
               | there is NIMPYism and zoning regulations and etc that
               | keeps enough housing from being built in areas people are
               | able to live (i.e., close enough to civilization to be
               | able to buy groceries without an hour long drive each
               | way, for instance), forcing pricing up, in a positive
               | reinforcement loop (scarcity = pricing goes up = people
               | buying for the 'investment' rather than a place to live =
               | more scarcity)
        
               | roflyear wrote:
               | It costs a ton to build a house in the US. If I gave you
               | free land likely it would cost you more to build a new
               | home there than it would to buy an equivalent which would
               | include the land.
        
               | lordnacho wrote:
               | That doesn't address the point. Think if food was an
               | investment item, rather than just a thing farmers make to
               | sell at a price greater than what it cost them to make
               | it.
               | 
               | Similarly, why aren't houses just a thing that costs a
               | bit more than the bricks and labor required to make them?
        
               | jasode wrote:
               | _> Similarly, why aren't houses just a thing that costs a
               | bit more than the bricks and labor required to make
               | them?_
               | 
               | Because words like "housing" and "houses" in
               | conversational speech hides the fact that it has 2 major
               | components: (1) _land_ and (2) the _building structure_
               | 
               | The big part of rising housing prices or "scarce housing"
               | or "demand exceeding supply" is really about _desirable
               | geographic locations_.
               | 
               | Sure, raw materials prices like lumber and copper pipes
               | go up in price too but it's also the _rising land value_
               | that 's contributing to the "return on investment".
               | That's the component price that doesn't work like food
               | commodities. My home is decades old and has outdated
               | technology that today's brand new homes have upgraded but
               | nevertheless, my so-called "house" has tripled in value
               | because a new hospital down the street was built 10 years
               | ago and all the doctors want to live in my neighborhood
               | to have a short 10-minute commute. If someone actually
               | bought my so-called "house", they may bulldoze it and
               | rebuild a new more modern home on it.
        
               | lostcolony wrote:
               | >> The big part of rising housing prices or "scarce
               | housing" or "demand exceeding supply" is really about
               | desirable geographic locations.
               | 
               | Only to a point. Many desirable geographic locations have
               | a lot of local factors that prevent additional housing
               | from being built with the intent of housing more people
               | (think homeowners defending their "property values",
               | zoning laws, etc). Similarly, homes being "investments"
               | means there's a self-perpetuating cycle; builders build
               | luxury homes instead of multi-tenant buildings, because
               | they know that's what companies want to buy (being
               | flipped the easiest with the highest rate of return), so
               | even when there is new land being developed, market
               | forces push it to being an "investment" rather than
               | housing people. Income inequality furthers this; why use
               | the land and sell a modest home to a worker, when you
               | could use the home and sell a luxury home at a much
               | larger markup to the rich?
        
               | lordnacho wrote:
               | Right, that's a major point. So why is it that we're ok
               | with land prices rocketing? After all the immutable
               | properties of land are not going to change from us
               | pouring more money into it. You don't get more central
               | London land from raising its price.
               | 
               | It's like a sink that eats up economic gains.
        
               | CogitoCogito wrote:
               | > Because you need them to outlay capital now in return
               | for likely future profits? That's literally what
               | investing is.
               | 
               | A builder is paid to build. They profit if their revenue
               | is greater than their costs. That is certainly possible
               | even if housing isn't an investment vehicle.
               | 
               | The makers of candy bars manage to profit yet I doubt
               | many people buy them as investments.
        
               | bragr wrote:
               | Builder != Developer. The builder is a service provider
               | and definitely doesn't finance construction.
        
               | CogitoCogito wrote:
               | > Builder != Developer. The builder is a service provider
               | and definitely doesn't finance construction.
               | 
               | What in my post doesn't apply for developers exactly?
               | They finance construction if they expect to profit. They
               | can profit even if the final product later doesn't
               | increase in value. In fact, why would they see that
               | profit anyway? Any increase in value would end up in the
               | final owner's pocket not the developer.
        
               | scarby2 wrote:
               | There are 2 aspects to this. Development should
               | absoulutely be a thing this is investment in the same way
               | investing in a manufacturing company is investment.
               | 
               | Buying/building property to rent should absolutely be a
               | thing as well. There's a service there. But the idea that
               | i buy a house now and in 5 years it's worth more than i
               | paid for it (relative to income) needs to die
        
               | roflyear wrote:
               | Depends where you buy the house...
        
             | bonestamp2 wrote:
             | Maybe I have misunderstood what you're saying, but it
             | wouldn't be a (good) investment vehicle if they didn't make
             | money.
        
           | Barrin92 wrote:
           | >You won't convince someone to build a new apartment building
           | if they can't make money
           | 
           | You don't really need to. Do what Singapore (or Vienna) did.
           | Create a Housing and Development board, build the housing
           | that you need... and that's about it.
           | 
           | These bizarre contortions that people go through of schemes
           | and tax credits and mechanisms, it's the same as the
           | healthcare sector, one single bloated mess.
        
             | dv_dt wrote:
             | When you look at the model that Germany is following in
             | some areas, it seems like a nice long term way to stabilize
             | housing prices.
             | 
             | https://tribunemag.co.uk/2022/07/germany-mietshauser-
             | syndika...
        
             | axus wrote:
             | Government housing projects had a bad outcome in the US...
             | "The Projects".
        
               | newfonewhodis wrote:
               | Your statement isn't wrong but can be misconstrued to
               | imply that government housing led to bad outcomes.
               | 
               | I very strongly suggest reading through citations of http
               | s://en.wikipedia.org/wiki/Subsidized_housing_in_the_Unit.
               | ...
               | 
               | tl;dr: "The Projects" were primarily concentrated outside
               | of major economic centers, were left out of public
               | transportation (and other) infrastructure projects. Mix
               | in the government sanctioned racism and segregation of
               | economic groups, "The Projects" in the US were doomed
               | before they even started.
        
             | AnimalMuppet wrote:
             | > You don't really need to. Do what Singapore (or Vienna)
             | did. Create a Housing and Development board, build the
             | housing that you need... and that's about it.
             | 
             | Unless you can explain how that's different from what the
             | Warsaw Pact did, or show that the Warsaw Pact housing,
             | while horrible, was still better than what the free market
             | would produce, then I'm not going to sign up for your
             | solution.
        
               | Barrin92 wrote:
               | it isn't really. Eastern bloc housing looks butt ugly but
               | it was cheap and equitable. The problems start when you
               | try to centrally manage every box of cornflakes you make,
               | not national infrastructure.
               | 
               | I'll go one further and tell you there is no such thing
               | as free market housing and never has been, just like
               | there's no free market submarine or free market
               | interstate highway. These are big governmental and
               | corporate projects and at best the market shuffles the
               | occupants around after the fact. Every project like that
               | is communist even in the good old US of A, just don't run
               | the entire country that way
        
               | [deleted]
        
               | rodgerd wrote:
               | It's pretty clear that no evidence would convince you to
               | abandon your zealotry, because otherwise you'd make the
               | trivial effort required to discover that Vienna or
               | Singapore do not look like the Warsaw Pact.
        
               | AnimalMuppet wrote:
               | > It's pretty clear that no evidence would convince you
               | to abandon your zealotry...
               | 
               | Personal attacks are not cool here.
               | 
               | > ... because otherwise you'd make the trivial effort
               | required to discover that Vienna or Singapore do not look
               | like the Warsaw Pact.
               | 
               | I _know_ they don 't look like the Warsaw Pact. But the
               | policy that Barrin92 is proposing sounds like Vienna, but
               | also sounds like the Warsaw Pact. In one place it works;
               | in one place it produced monstrosities.
               | 
               | My question is: If we adopt this policy, why do we think
               | we're going to get Vienna's outcome instead of the Warsaw
               | Pact's?
        
           | ska wrote:
           | > You won't convince someone to build a new apartment
           | building if they can't make money.
           | 
           | This is orthogonal to the investment value of the apartment
           | building as an asset. Surely you generally build rental
           | properties to make a profit via rent, not to make a profit on
           | the land & building - thought you'll factor that into your
           | models.
        
           | TaylorAlexander wrote:
           | > You won't convince someone to build a new apartment
           | building if they can't make money.
           | 
           | Demonstrably false. The city of Venna Austria builds housing
           | for people because people need housing, not because it
           | expects to make money. This kind of thinking demonstrates a
           | depressingly narrow view of human possibilities.
           | 
           | https://www.huduser.gov/portal/pdredge/pdr_edge_featd_articl.
           | ..
        
       | 1024core wrote:
       | > Those charts almost always showed that consumers would make
       | thousands of dollars more by selling to Opendoor.
       | 
       | If Opendoor is paying more than what you'd get in the open
       | market, where are they going to make the money from? Aren't they
       | going to lose money on every deal then?
       | 
       | There's the old adage: if it sounds too good to be true, it
       | usually is.
        
         | tempsy wrote:
         | I thought the trade off was largely understood by the seller eg
         | you take a small discount in exchange for a very fast and
         | reliable sales process where you can sell to Opendoor in days
         | vs weeks/months in a traditional sales process?
        
         | chrismcb wrote:
         | If they cut out the real estate fees, yeah you can make (save?)
         | More money by selling to them. And they can still turn a
         | profit... A portion of the profit the real estate agents would
         | have made.
        
       | ketchupdebugger wrote:
       | literally just watched a youtube vid explaining Opendoor's scam.
       | https://youtu.be/nXcz6CHDtwo
        
       | trixie_ wrote:
       | I'm hopeful that Opendoor can make home buying/selling as quick
       | and easy as Carvana has made buying and selling cars.
       | 
       | I think key to that is to ensure they minimize the amount of time
       | they hold any property. Don't try to make money on the long term
       | movements of the market. Just buy the house at a slight discount
       | by saving on realtor and closing cost fees and do the same on the
       | buy side - turn it around fast, low profit margin, but at
       | national scale.
       | 
       | That could be a recipe for success, but yea they need to be
       | honest that there's no guarantee their offer is better than the
       | open market because you never know. It's up to the seller to make
       | that judgement call. I have many friends who were able to sell
       | quick with Opendoor, full well knowing they were potentially
       | losing some money in exchange for convenience. That's ok if we're
       | all honest about it.
        
         | dlandis wrote:
         | Haha carvana is banned in Illinois and under investigation in a
         | bunch of other states due to their shady practices.
        
       | thr0wawayf00 wrote:
       | > The Federal Trade Commission today took action against online
       | home buying firm Opendoor Labs Inc., for cheating potential home
       | sellers by tricking them into thinking that they could make more
       | money selling their home to Opendoor than on the open market
       | using the traditional sales process.
       | 
       | Serious question: why are businesses like this allowed to
       | continue after getting caught lying to prospective customers?
       | These founders should be dragged into court and ruined over this.
       | No excuse for this kind of behavior.
        
         | [deleted]
        
         | [deleted]
        
         | MisterBastahrd wrote:
         | There are a few stated benefits of Opendoor in their ads that
         | would probably be completely fine if sold to customers in that
         | manner.
         | 
         | 1. They claim that their ability to make an all-cash offer on
         | your current house allows you to turn around quicker to make an
         | offer on another home without struggling through a ton of
         | financing issues.
         | 
         | 2. They claim that once they've purchased the home, they will
         | assume all responsibility for repairs and cleaning.
         | 
         | 3. They claim that in the event that the company sells the home
         | for greater than the estimated value, they will give you the
         | difference.
         | 
         | None of these are bad. But if someone came to you and told you
         | that they'd sell you the home for cash and take a little bit
         | more off the top for inspection / repairs, I think that
         | mortgages are so long that some people would rather do that
         | than deal with all the headaches otherwise.
        
       | scottydelta wrote:
       | Opendoor technologies(OPEN) is currently trading at $4.79, way
       | below their all time high of $35.88 back in Feb 2021. They went
       | public via SPAC merger with IPOB on Dec 18, 2020.
       | 
       | Some might say that they are not doing very good.
        
         | onlyrealcuzzo wrote:
         | They aren't doing very good for who?
         | 
         | Obviously the other person on the opposite side of that trade
         | _is_ doing very good.
        
           | dapids wrote:
           | He didn't say who. He said for they/them, the company.
        
       | keyboardclicker wrote:
       | Check this out: the "Head of Brand Marketing" for Opendoor, Kyle
       | Tibbitts[0], left a few years ago to be the Head of Marketing at
       | Fast.co[1], another scam that imploded. Right before Fast
       | collapsed, he left to join a new real estate startup,
       | wander.com[2], which is now launching a real estate investment
       | vehicle, "Wander Atlas"[3], to stay afloat. The marketing page
       | says they are "Democratizing access to the private market behind
       | Wander".
       | 
       | The guy is 2/3 on scams... with a good chance of landing 3/3 in
       | due time.
       | 
       | [0]: https://www.linkedin.com/in/kyletibbitts [1]:
       | https://news.ycombinator.com/item?id=30922981 [2]:
       | https://www.wander.com [3]: https://www.wander.com/atlas
        
         | newfonewhodis wrote:
         | I'm equally curious about the board and the C-level staff.
        
       | gist wrote:
       | Separate point what's with the tendency other than to try and
       | impress and mislead in some way to use 'Labs' (ie Opendoor Labs)
       | in your business name when what you are doing has nothing to do
       | at all with the traditional definition of a laboratory. (I know
       | others do this as well.)
        
       | Apocryphon wrote:
       | Wonder what Keith Rabois is gonna say in response to this.
        
       | fiprofessor wrote:
       | It might better to link to directly to the FTC press release
       | (https://www.ftc.gov/news-events/news/press-releases/2022/08/...)
       | instead of the FTC "Consumer Alert" that is currently linked at
       | the time I post this comment. The "Consumer Alert" is written at
       | a bit of a simplified level, and I think this audience might
       | benefit from the more precise statement of the alleged issue that
       | is in the press release.
        
         | tareqak wrote:
         | For posterity, here is the original headline and the original
         | link:
         | 
         |  _Closing the door on home buying company Opendoor's false
         | claims_
         | 
         | https://consumer.ftc.gov/consumer-alerts/2022/08/closing-doo...
         | 
         | .
         | 
         | Update: Sorry, I can't change the URL since it has been over an
         | hour long since I made the original post. Changing the headline
         | alone would be confusing/misleading.
        
         | dang wrote:
         | Ok, changed from https://consumer.ftc.gov/consumer-
         | alerts/2022/08/closing-doo.... Thanks!
        
       | balozi wrote:
       | Seems like low hanging fruit for any aspiring attorney general in
       | almost any part of the country.
        
       | Xcelerate wrote:
       | So how is the FTC determining the counterfactual of what the
       | homes would have sold for on the open market?
        
         | trts wrote:
         | Good question.
         | 
         | > 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 [1]the
         | company's offers have been below market value on average and
         | [2]its costs have been higher than what consumers typically pay
         | when using a traditional realtor.
         | 
         | My understanding of Opendoor is that their product specifically
         | targets homes in the low to mid range of the price
         | distribution, making it easier for them to have a high-quality
         | prediction on whether acquiring a home can be profitable to
         | them.
         | 
         | for [1] this almost surely means they will be below market on
         | average, since the upper-bound is unconstrained. Home prices
         | follow a log-normal distribution.
         | 
         | [2] sounds worse. A typical agent-driven transaction is between
         | 4.5% and 6% of the sale price. For Opendoor to be pocketing
         | _more_ than this is a pretty bad value prop. However, even
         | granting that this is the case -- there is some premium that
         | certain home sellers may place on just washing their hands of
         | the whole process, handing their keys to Opendoor and getting a
         | check next week. That seems fine to me, but not if Opendoor are
         | claiming otherwise.
        
           | jacquesm wrote:
           | > A typical agent-driven transaction is between 4.5% and 6%
           | of the sale price.
           | 
           | Which is completely ridiculous.
        
             | Apocryphon wrote:
             | And Opendoor is pocketing more than that!
        
             | happyopossum wrote:
             | It may sound ridiculous to you, but those numbers aren't
             | codified by law, and anyone who wants to change that is
             | more than able to try. There have been tons of efforts to
             | do so - some very heavily capitalized, but none of those
             | companies have ever really taken off.
        
               | TedDoesntTalk wrote:
               | They are ridiculous when the value of the home is large.
               | A $2m home has $100,000 realtor fees but a $500,000 home
               | has a $25,000 fee. Do you think the realtor for the $2m
               | home really does anywhere near $100,000 worth of work?
               | 
               | Fees should instead be a fixed amount relative to the
               | cost of marketing the home, holding open houses, and all
               | the other legwork to sell a home.
               | 
               | No other job has this kind of royalty payment except
               | publishing (books, music, etc).
        
         | dragonwriter wrote:
         | > So how is the FTC determining the counterfactual of what the
         | homes would have sold for on the open market?
         | 
         | The complaint [0] which preceded the settlement laid out the
         | detailed narrative of specific steps Opendoor took to reduce
         | it's offers based on its own internal estimate of market
         | prices, and Opendoor's own internal analyses of it's offered
         | prices (separately on accepted and customer rejected offers)
         | being below market value.
         | 
         | So Opendoor already did that work for the FTC.
         | 
         | [0] pdf:
         | https://www.ftc.gov/system/files/ftc_gov/pdf/Complaint%20%28...
        
       | jmole wrote:
       | "The order requires Opendoor to pay the Commission $62 million,
       | which is expected to be used for consumer redress."
       | 
       | What does the FTC actually do with the money in cases like these?
       | Give it to harmed consumers?
        
         | newfonewhodis wrote:
         | Yes.
         | 
         | > which is expected to be used for consumer redress
        
           | nickff wrote:
           | I believe the parent is asking whether that money actually
           | makes it to the victims. Many government agencies fail to
           | execute on their commitments, it would be unsurprising if the
           | FTC simply held on to the money, and never returned it.
        
       | babycake wrote:
       | So do sellers who got scammed by Opendoor get any kind of
       | reimbursement? Or does FTC dust off their hands and call it a
       | day?
        
         | dragonwriter wrote:
         | From the release:
         | 
         | "To settle the FTC's charges that the company's claims were
         | deceptive, Opendoor has agreed to pay $62 million, which the
         | FTC will use for refunds to people who were affected."
        
         | rideontime wrote:
         | There's a link at the top of this page which answers this
         | question!
        
       | tiahura wrote:
       | Wait, you mean I shouldn't take the first offer I get just
       | because they say it's the best?
       | 
       | The next thing we're going to learn is that there really isn't
       | someone coming in later who's super interested in the used Honda.
       | 
       | This seems overly nannyish.
        
         | CobrastanJorji wrote:
         | Making a bad deal is perfectly legal. Lying about the product
         | you're offering is not.
         | 
         | OpenDoor was reportedly making several false claims, including
         | "we make money from fees (and not by immediately reselling your
         | house for a profit because we bought it below market value)" or
         | "we charge about the same in repair costs as you'd pay on the
         | open market" or "we buy your house at market value (and not
         | intentionally below what we think is market value)."
        
           | londons_explore wrote:
           | OpenDoors crime wasn't making those claims... the crime was
           | making those claims _without keeping sufficient evidence that
           | they were true_.
           | 
           | I'm sure they could have proven all those claims. They could
           | have said "Last year we made $XX Million from fees". Sounds
           | like a big number, but might still have only been tiny
           | compared to market movements.
           | 
           | They could have said "we charge about the same in repair
           | costs as you'd pay on the open market" by just finding one
           | quote from a builder to back it up.
           | 
           | They could have said "we buy your house at market value" by
           | just having a model of market value which tended to lowball
           | valuations - rather than having an accurate model and then
           | putting a " * 0.9" on the output of the model. One way to do
           | that for example would be to build the model on historic
           | data, and ignore the fact that house prices are at all time
           | highs right now. And house prices have been the 'highest
           | ever' for nearly every year in the past 200 years.
        
             | CobrastanJorji wrote:
             | No, the crime was making claims, in commercial advertising,
             | in a materially deceptive manner, which would probably harm
             | someone, in a way that involves interstate commerce.
             | 
             | "Keeping sufficient evidence that they were true" implies
             | that the claims were true, which they presumably were not
             | if OpenDoor agreed to a settlement.
        
             | Jorge1o1 wrote:
             | Yes and no.
             | 
             | It goes beyond lack of data and well into fraud (knowing
             | deception).
             | 
             | See, for example, point 34 of the report:
             | 
             | >Opendoor has used an automated system to generate expected
             | market values for homes. In many instances, Opendoor's
             | employees have manually adjusted these values before
             | presenting them to consumers as offers. Opendoor's internal
             | analyses showed that these manually adjusted offers were
             | several percentage points below Opendoor's assessment of
             | market value. Beginning later than 2019, Opendoor
             | instituted a policy to reduce its manually adjusted offers
             | to [REDACTED] below what Opendoor assessed as market value.
             | 
             | In other words, they're promising above-market value while
             | actually quoting below even their OWN estimation of market
             | value (which is undoubtedly revised down)
        
         | leereeves wrote:
         | Fraud is still fraud even if a reasonable person shouldn't
         | trust the claims.
        
           | avg_dev wrote:
           | Simple as that.
           | 
           | > According to the FTC, Opendoor said it would pay market
           | value for people's homes while saving them money on costs.
           | That way, people selling their homes would make thousands of
           | dollars more than they would on the open market. But, the FTC
           | says, it wasn't true.
        
             | teraflop wrote:
             | And most importantly (according to the complaint), Opendoor
             | _knew_ it wasn 't true. They were deliberately adjusting
             | offer prices downward from their own estimated market
             | value, and they had lots of internal data showing that the
             | result was that customers made less money by selling to
             | Opendoor, but they continued to say the opposite in their
             | marketing materials.
        
           | SQueeeeeL wrote:
           | Yeah, literally who says it's "nannyish" that blatantly lying
           | to consumers is wrong. Holding businesses to any kinds of
           | standards is wrong I guess.
           | 
           | Actual dystopian vibes.
        
         | felipesoc wrote:
         | It's false advertising whether nannyish or not.
        
       | oh_my_goodness wrote:
        
       | tonymet wrote:
       | Economics has long understood the strength pricing signals have
       | to skew markets. I think a lot of the growth in real estate have
       | been these phony buyer and pricing platforms (open door, zillow &
       | redfin). Sellers are constantly being bombarded with pricing
       | signals about their house, even when off market. And because they
       | are "algorithmic", sellers trust them more than a listing agent.
       | 
       | A good example study followed pricing when a city set a cap on
       | Payday loans that was higher than the average market rate. Once
       | the cap went into effect, all of the lenders below the cap moved
       | their rates up to the cap.
       | 
       | You see this with Cars & Kelly Blue book as well.
       | 
       | All of these pricing signals skew the market and should be
       | banned.
        
         | happyopossum wrote:
         | > All of these pricing signals skew the market and should be
         | banned.
         | 
         | Aside from the obvious issues with prior restraint, where do
         | you stop? In real estate, a list of comparable sales (comps in
         | RE speak) is commonly used to set an asking price. That list is
         | clearly a pricing signal, would you advocate hiding the sales
         | price of houses?
         | 
         | Ok, now you've done that, how does the government assess
         | property taxes? And when they do, are those assessments now
         | secret as well?
         | 
         | You're going down a really dark and weird road to try to fix a
         | small part of a big problem...
        
         | rossdavidh wrote:
         | Well, "pricing signals" skewing markets is what is supposed to
         | happen, that's also how a healthy market works. As a
         | counterexample, opacity in the labor market has long allowed
         | employers to underpay, because most of their labor force don't
         | realize what the pushy few who demand a raise are getting. I
         | have also been able to get a better price on cars (not this
         | year, but in normal car markets) by making it obvious to the
         | dealer that I was looking at the Kelly Blue Book, so that they
         | didn't think I would be willing to pay more than that. Removing
         | price signals typically provides more power to the larger
         | party, that does more transactions in that market, and thus has
         | a large advantage in knowledge of price.
         | 
         | The issue here wasn't that Opendoor had pricing signals, but
         | rather that they were lying about what those market prices
         | were.
        
           | TedDoesntTalk wrote:
           | > "pricing signals" skewing markets is what is supposed to
           | happen
           | 
           | Only if the signals are accurate. Zillow calculates value
           | based on comps in the same zip code since the range of
           | properties in a zip code can vary tremendously. This is
           | ridiculous in many zip codes. Ask any realtor what they think
           | of "Zestimates". You'll get an earful.
        
       | flerchin wrote:
       | They somehow still lost $661M last year.
        
         | mperham wrote:
         | Of course. Gotta write off the entire grift so they pay no
         | taxes.
        
       | mensetmanusman wrote:
       | Isn't this what realtors do when they sell properties they don't
       | own?
       | 
       | Statistics have shown they sell for lower prices to increase
       | throughput and sales compared to when they sell their own
       | properties...
        
         | balozi wrote:
         | Maybe I am misunderstanding this comment, but is it a common
         | occurrence for realtors to sell properties they don't own?
        
       | TuringNYC wrote:
       | >> Instead, the FTC says Opendoor's offers were lower than a
       | home's market value, and the company asked sellers to pay for
       | home repair costs that were higher than what people would
       | typically spend on repairs in a market sale. As a result, most
       | people who sold their homes to Opendoor typically lost thousands
       | of dollars compared to what they would have made if they'd sold
       | their homes on the open market.
       | 
       | I'm sympathetic to Opendoor on this. Are they counting _ALL_ the
       | costs when they say Opendoor customers  "lost thousands"?
       | 
       | - Are they counting the carry of keeping [a potentially empty
       | house] on the market for months? (e.g., real estate taxes,
       | maintenance fees)
       | 
       | - Are they counting the 4-6% real estate real estate commission
       | the agent would take that Opendoor customers arent paying? If I
       | sell the house at a 20k discount to Opendoor, but save a $40k
       | real estate commission, that sounds like a good deal.
        
         | Closi wrote:
         | The article definetly gets this bit wrong:
         | 
         | > Instead, the FTC says Opendoor's offers were lower than a
         | home's market value, and the company asked sellers to pay for
         | home repair costs that were higher than what people would
         | typically spend on repairs in a market sale.
         | 
         | FTC Website:
         | 
         | > Consumers likely would have paid the same amount in repair
         | costs whether they sold their home through Opendoor or
         | traditional sales
         | 
         | Those aren't the same
        
           | mgkimsal wrote:
           | Let's say my home would sell on the open market for... $260k.
           | Got an offer from opendoor indicating they'd offer me $240k,
           | but then I also had to factor in another $13k for their
           | estimated repairs, so my final 'in my pocket' amount was
           | $227k. That's a non-trivial diff, because I could likely have
           | gotten closer to $260k on open market, then negotiated $10k
           | or so with buyer (to get needed repairs in place by sale
           | date).
           | 
           | You're paying for convenience, and while I didn't find the
           | opendoor written offers completely confusing, it did seem a
           | little... misdirection-y.
        
             | Closi wrote:
             | I'm not saying that Opendoor isn't being misleading on this
             | point, I'm just saying that the FTC didn't say what the
             | article said it did :)
        
         | proales wrote:
         | You really think that Opendoor did not make sophisticated
         | claims to the FTC before settling? Like they somehow forgot the
         | broker commission cost?
        
           | TuringNYC wrote:
           | >> You really think that Opendoor did not make sophisticated
           | claims to the FTC before settling? Like they somehow forgot
           | the broker commission cost?
           | 
           | The letter, which I quoted on my comment, was pretty clear on
           | the trade-offs or iBuy vs traditional. You're trading dollars
           | for upfront pricing, immediacy, and certainty. The letters
           | doesn't mention anything about that. The letter acts as if
           | "price" is the only cost, but in real life there are many
           | costs include hidden costs like carry.
           | 
           | I'm also saying that the US regulatory apparatus right now is
           | very strange and openly antagonistic to tech firms while
           | turning a blind eye to traditional businesses are often may
           | be far more extractive.
           | 
           | Example 1: We're told WhatsApp is "bad" because supposedly
           | competition. Except as a consumer, it costs me nothing, has
           | no 2-yr plans, no mystery fees, no $90/mo bill. On the other
           | hand, the same regulators wont say anything to a mobile phone
           | company.
        
         | gregman wrote:
         | Agreed. iBuying is a business and your paying for the
         | convenience of them taking your home as-is. Even though their
         | offering price is lower than what you'd receive from selling
         | with a realtor, you still end up spending 10-15% of your home
         | value when selling the traditional way.
         | 
         | source: https://www.redfin.com/blog/how-much-does-it-cost-to-
         | sell-a-...
        
           | mbesto wrote:
           | > iBuying is a business and your paying for the convenience
           | of them taking your home as-is
           | 
           | If that was the case then OpenDoor wouldn't have "asked
           | sellers to pay for home repair costs that were higher than
           | what people would typically spend on repairs in a market
           | sale".
           | 
           | That's not my definition of "as-is", is it yours?
        
             | gregman wrote:
             | Well no, but I'm curious what the FTC's studies of that
             | were. There are plenty of reviews of OpenDoor (check
             | Reddit) where reviewers stated they just needed to clean
             | out their house. I'm guessing OpenDoor has a certain
             | standard for agreeing to buy a home, and some homes they
             | ask to do repairs would otherwise have been turned away.
        
               | TuringNYC wrote:
               | >> I'm guessing OpenDoor has a certain standard for
               | agreeing to buy a home, and some homes they ask to do
               | repairs would otherwise have been turned away.
               | 
               | This seems fair to me, there is no guarantee that when
               | selling a home on the market, buyers wont similarly ask
               | for repairs or dollar concessions for repairs.
        
         | mgkimsal wrote:
         | IIRC, you'd still pay some 'commission' fee, but it was to
         | opendoor itself. It was listed in their offer breakdowns, just
         | downplayed a bit. Yeah, perhaps it's 'only' 3%, but then
         | buffering in another 4% for maintenance updates on the house
         | brings it to 7% (for example). Some of that you might get in
         | traditional sales anyway - sale contingent on seller fixing
         | floors/windows/etc.
         | 
         | I got 3 offers from opendoor over about an 18 period. We were
         | on the fence about moving, and explored opendoor and Zillow
         | house buying, to save us some hassle. The offers were easy to
         | see that they were lower than 'market'. Part of what you're
         | paying for is convenience and timing. Is it worth it to me to
         | 'lose' $10k off what I might make in the 'open market' if it
         | means I know for sure the house will be sold on a certain date?
         | IIRC, also, one of those companies offered some discount on
         | their fees if you were buying another one of their houses in
         | their portfolio.
         | 
         | What I did see in our area (slightly rural area) was a year or
         | so of buyers like opendoor coming in with offers fairly low,
         | then flipping and reselling, and making that spread, but fairly
         | quickly. A $300k house they might have picked up for $270k then
         | flipped 2-3 months later for $340k.
        
           | TuringNYC wrote:
           | >> A $300k house they might have picked up for $270k then
           | flipped 2-3 months later for $340k.
           | 
           | Even this may or may not be fair. If the flipper did tens of
           | thousands in repairs, perhaps the extra price is now
           | justified? Any idea of the homes were flipped as-is or after
           | value-add updates?
        
         | Finnucane wrote:
         | Yes to all that.
         | 
         | https://www.ftc.gov/system/files/ftc_gov/pdf/Complaint%20%28...
        
         | oh_my_goodness wrote:
         | "To settle the FTC's charges that the company's claims were
         | deceptive, Opendoor has agreed to pay $62 million"
        
         | nathanvanfleet wrote:
         | So you're saying the FTC wasn't understanding the basics of
         | home buying, and OpenDoor wasn't able to convince them either
         | since they ended up paying 62 million dollars to balance things
         | for the sellers affected? It kind of sounds like the people
         | actually involved here may very well know about, you know,
         | their business, and you might be in the position of someone
         | who's just armchair speculating?
        
           | TuringNYC wrote:
           | >> So you're saying the FTC wasn't understanding the basics
           | of home buying
           | 
           | I'm saying the FTC letter, which i quoted, is very vague and
           | offers no clear argument nor addresses the tradeoffs.
           | 
           | Its like complaining about stock brokerage MARKET orders that
           | hit the ASK PRICE and then saying you could have gotten a
           | better price with a LIMIT order (though then you may not get
           | an executed order at all...)
        
         | fny wrote:
         | You're missing the point... they did all that while promising
         | "you'd make more money selling it to them than you would on the
         | open market".
         | 
         | That's the issue.
        
           | revnode wrote:
           | He's not missing the point, he's outright saying that
           | statement is true because of the reasons he gave?
        
           | TuringNYC wrote:
           | >>promising "you'd make more money selling it to them than
           | you would on the open market".
           | 
           | If they were literally "promising" more money, that would be
           | a big issue. When I saw Opendoor, it seemed to essentially be
           | a Market Order for home selling. The promise was _immediacy_
           | and the trade-off was lower-price. However, the immediacy
           | also carried savings w /r/t not having to carry the property
           | costs. So it could actually end up being a better deal to
           | sell immediately depending on carry costs. I was just sad to
           | see such a thin letter lacking details.
        
         | chadash wrote:
         | > Are they counting the 4-6% real estate real estate commission
         | the agent would take that Opendoor customers arent paying?
         | 
         | your overall point stands, but Opendoor does have a 5% "service
         | charge" that's on par with an agent commission.
        
       | kadomony wrote:
       | I'd rather housing in the US follow Japan's model and depreciate
       | to a value of nothing over 30 years.
       | 
       | Why? It'd drive investment into other avenues, keep commodities
       | cost low, and get more people into houses. The current housing
       | market is stupid.
       | 
       | -A disgruntled millennial who despite great savings can't afford
       | anything
        
         | endisneigh wrote:
         | How much savings do you have? I bet you can afford something.
         | Usually when people say this, in my experience, it means they
         | have some set of arbitrary requirements that aren't being
         | fulfilled. That's fair enough, but you can afford something.
        
         | nabakin wrote:
         | It's not Japan's model driving housing costs low. It's the
         | population growth rate.
        
         | TedDoesntTalk wrote:
         | > A disgruntled millennial who despite great savings can't
         | afford anything
         | 
         | I'm sorry for your experience. I'm Gen X and can't imagine how
         | frustrating this must be for you.
        
       | notacoward wrote:
       | Opendoor got $1.9B in funding for this business model. In ten
       | rounds. Did none of those VCs do anything approximating due
       | diligence? Or did they do it and just not care that it was
       | basically an AI-washed version of a _very_ old con? Seems like
       | there was more than one act of malfeasance here.
        
         | xfour wrote:
         | What's the very old con?
        
           | notacoward wrote:
           | It's basically Pressure Tactics 101. Claim (without a shred
           | of proof) that you have a magic key to lower costs. Create a
           | false sense of urgency to close the deal right now or miss
           | out. (That one should be familiar to anyone who has shopped
           | online in the last decade BTW, and I'll bet more than a few
           | of you have _implemented_ it.) You can do it with any kind of
           | asset, really, but houses are big assets and the process is
           | more complex /opaque than most so they're a perennial
           | favorite. If somebody could _truly_ make buying or selling a
           | home that much better, you wouldn 't hear about it by them
           | coming to you.
        
         | dragonwriter wrote:
         | > Opendoor got $1.9B in funding for this business model. In ten
         | rounds. Did none of those VCs do anything approximating due
         | diligence? Or did they do it and just not care that it was
         | basically an AI-washed version of a very old con?
         | 
         | "Brazenly breaking the law in a way that probably won't get
         | cracked down on until after we've made a profitable exit"
         | doesn't seem to business model VCs are at all loathe to fund.
        
         | tomrod wrote:
         | Not sure what the "very old con" is, but the notion of AI-
         | washing bad behaviors (e.g. predatory practices) is a
         | fascinatingly succinct way to describe a lot of vaporware or
         | similar issues "AI" promises.
         | 
         | I work in the space -- I'll be using this. Thanks for the
         | encapsulation!
        
       | slickdork wrote:
       | per the article, they were fined 62 million for (years of?)
       | fraud.
       | 
       | Their 2021 profit alone was 730 million (on 8 billion
       | revenue).[1]
       | 
       | When the fine is less than 9 percent of one years profit, will
       | they really stop doing what they're doing?
       | 
       | edit: a lot of people are saying the company actually lost money.
       | But, and this is an honest question, is it really 'losing money'
       | when the majority of that loss is "primarily driven by non-cash
       | stock based compensation of $536 million"? Looking at previous
       | compensation tables, it looks like the top four people in the
       | company are earning 100+ million in stocks? Is that what's making
       | the company be considered in the red? [2]
       | 
       | [1]https://investor.opendoor.com/news-releases/news-release-
       | det...
       | 
       | [2] https://investor.opendoor.com/node/8201/html#tEC
        
         | xenadu02 wrote:
         | The FTC has two major enforcement mechanisms available to it:
         | The normal administrative one where the agency initiates an
         | administrative proceeding, makes a judgement, then more or less
         | must restart the process with a court case to enforce that
         | judgement. The second mechanism allows it to go directly to a
         | court.
         | 
         | Exactly what the FTC is allowed to ask for is a bit convoluted
         | because the law isn't very clearly written. One reading says
         | they can do the common sense thing by demanding profit from
         | illegal conduct be returned and impose punitive damages -
         | especially on repeat offenders, along with imposing penalties
         | for damage done to the overall market. The other reading says
         | they can only ask for money to reimburse specific consumers for
         | specific damages (so as a consumer your time, aggravation, etc
         | are worth $0; damage to your competitors who were operating
         | fairly don't count). And by the more restrictive reading the
         | direct-to-court route only allows them to seek an injunction,
         | no damages.
         | 
         | Unfortunately SCOTUS recently said the FTC is not allowed to
         | seek anything except an injunction via the direct-to-court path
         | and if that case is any indicator it is likely courts will also
         | prohibit punitive damages and profit disgorgement via the
         | administrative route as well. That severely restricts the
         | ability of the FTC to punish companies.
         | 
         | For example a recent case involved DreamCloud mattresses that
         | claimed they were made in the USA with 100% USA materials...
         | when in fact some of their mattresses were pure imports and
         | others were made in the USA of imported materials. Under the
         | new court rulings the FTC has to show how this harmed the
         | purchasers of the mattresses and can only seek money to
         | compensate those consumers for those damages. The FTC can no
         | longer impose penalties for the obviously flagrant conduct, for
         | the harm they did to the overall marketplace, for the harm to
         | competitors (both those who do and do not manufacture in the
         | USA), etc. Anything that doesn't have a directly measurable
         | monetary value is irrelevant. And if DreamCloud does the same
         | thing again it hardly matters because the FTC is limited to the
         | same remedies.
         | 
         | We need Congress to pass an act cleaning up the FTC's
         | enforcement powers.
        
         | fshbbdssbbgdd wrote:
         | It depends on how much money they made on the fraud divided by
         | the probability of getting caught. The company's entire profit
         | isn't really relevant.
         | 
         | According to your link the company actually lost money. So if
         | the fine should be proportional to the company's profit, the
         | government should be paying Opendoor?
        
           | mtgx wrote:
        
           | grenoire wrote:
           | So what, they should be able to give fraud another go?
        
             | fshbbdssbbgdd wrote:
             | Is the counter-proposal that if some part of any company
             | commits fraud, the company should be shut down, everyone
             | who works there should become unemployed, and anyone who
             | depends on company's product should go without?
             | 
             | To me it seems more reasonable to set the penalties at a
             | level that's high enough to deter violations. To make that
             | calculation, the main inputs should be how much money they
             | can make from the violation and how likely they are to get
             | caught. Other profits the company made that weren't from
             | fraud are irrelevant. (or in this case, losses, since we
             | are discussing an unprofitable company)
        
               | tompt wrote:
               | I don't understand why a corporate death penalty is seen
               | as untenable. For some crimes, yes shut the business down
               | and zero-out the folks who sought to profit from the
               | unlawful activity. If some of those people were defrauded
               | into believing the business was lawful, the should seek
               | the same remedies other defrauded people do.
               | 
               | You ask if the folks who depend on the company's product
               | should go without. No, they should move their business to
               | a competitor. If there is no competitor, maybe that's
               | evidence that the business plan is not viable while
               | acting lawfully.
        
               | powerhour wrote:
               | I'm down with fines and jail for the executives. Fines
               | alone are insufficient and nearly pointless.
        
               | deepdriver wrote:
               | Send those who knowingly committed fraud to prison.
               | Incentive those who might've known, or chose not to know,
               | to be more careful in the future, perhaps through fines
               | or minor jail time. I think even a few weeks in jail
               | would be more of a deterrent for some than a minor tax on
               | their fraud's profitability.
        
               | salawat wrote:
               | Congratulations. You now have to meet a burden of proof
               | (beyond reasonable doubt) to convict a class of people
               | who practically by definition are trained (either by
               | experience, or by legal counsel/their social strata) to
               | communicate in ways to make things happen which leave
               | little or no paper trail leading back to them.
               | 
               | Be the first person in a group of founders to want
               | someone to put something controversial down on paper. I
               | guarantee you. You will get chilled out.
        
         | dragonwriter wrote:
         | > will they really stop doing what they're doing?
         | 
         | Yes, if they don't want to get an easy reaming by the federal
         | government, because in addition to the cash portion of the
         | settlement, the consent decree includes:
         | 
         | (1) a requirement that they stop making the specific claims
         | that were at issue, and
         | 
         | (2) a requirement that they stop making _any_ financial claims
         | to consumers without "competent and reliable evidence to
         | support" those claims.
         | 
         | That basically means that if they keep doing anything like what
         | was claimed in this case, the FTC gets to treat them like a
         | money pinata without proving a violation of the generally-
         | applicable rules, because they've accepted, in a legally-
         | binding way, stricter rules where violations are easier to
         | prove and harder to refute.
         | 
         | The cash payment is almost never the most important part of a
         | settlement with a regulatory agency in terms of preventing
         | similar future abuse by the same company.
        
         | 1123581321 wrote:
         | They lost $662MM last year. "Gross profit" is before all their
         | operating expenses. It's a confusing term if you're not used to
         | reading financial statements.
        
         | rossdavidh wrote:
         | Or, it might imply that the size of their infraction was pretty
         | small compared to the size of the business they were doing. It
         | might also imply that the FTC wasn't too certain they could
         | prevail if it went to court, and OpenDoor was willing to settle
         | for a relatively small fine but if the FTC tried to get a large
         | fine they were worried the court might find the disparity
         | between market and what OpenDoor was quoting was within the
         | margin of uncertainty.
         | 
         | I mean, there were several companies providing quick online
         | estimates of house value. I don't see how OpenDoor could have
         | been all that far off the market value, without most people
         | noticing.
        
         | treis wrote:
         | I'm not really sure I'd call this fraud. In that Opendoor
         | delivered the product the customer was promised and paid for.
         | Lying about the quality of that product compared to the
         | alternatives is dishonest for sure but I don't think anyone
         | here was really cheated. It's understood that when companies
         | tout their product compared to competitors it's not a fair
         | comparison.
        
           | SheinhardtWigCo wrote:
           | It's not even clear to me that they lied. If someone claims
           | the "true market value" of an asset is $X, and the owner
           | accepts an offer of $X, then the market value of the asset is
           | indeed $X, no?
        
           | base698 wrote:
           | The National Association of Realtors is the second largest
           | lobbying group. Bet they are at least part of the reason.
           | 
           | https://www.opensecrets.org/federal-lobbying/top-spenders
        
         | hn_throwaway_99 wrote:
         | "Gross profit" was $730 million. Net loss was actually $662
         | million.
         | 
         | I think a better metric is to look at how many homes Opendoor
         | bought (36908 in 2021), and if possible identify those
         | transactions where some misleading marketing took place (not
         | sure if that's possible), then divide the fine by that much.
        
       | lewdev wrote:
       | Curious, how would a company buy properties at supposedly higher
       | than market prices earn a profit? Do they just want to accumulate
       | equity?
        
         | dragonwriter wrote:
         | Well, in Opendoor's claimed business model, they did that
         | through separately-disclosed fees that they charged, not the
         | purchase price.
        
         | ceeplusplus wrote:
         | Theoretically, you're picking off improperly priced homes and
         | quoting a tighter buy/sell spread, so you aren't buying higher
         | than the "market" price. The seller/buyer is the one crossing
         | the spread.
         | 
         | In practice it seems like something isn't properly hedged so
         | Opendoor and a lot of other iBuyers are exposed to the
         | underlying asset rather than just capturing the spread and
         | picking off incorrectly priced homes. That's why you see their
         | margins go up when housing does well and down when housing does
         | poorly. A proper market maker should have no exposure to the
         | underlying (e.g. market makers made record profits in 2020
         | despite equities tanking). I bet if a Wall Street quant firm
         | came in they'd roll over Opendoor and the like.
        
           | TheCoelacanth wrote:
           | I bet Wall Street quant firms don't operate on individual
           | houses for a reason, because it's too illiquid and non-
           | fungible for someone to be a proper market maker.
        
         | bena wrote:
         | Because the market changes.
         | 
         | I bought a house recently and according to Zillow, I'm
         | technically up about 10% of the purchase price just 18 months
         | later.
        
       | exogeny wrote:
       | Rabois is a founder and on the board of an unethical, scammy
       | company? Surely you jest! He seems like such a great guy!
        
         | Apocryphon wrote:
         | Feels like he's directly trying to hawk Miami beachfront
         | property these days.
        
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