[HN Gopher] FTC takes action to stop Opendoor from cheating pote... ___________________________________________________________________ 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. ___________________________________________________________________ (page generated 2022-08-01 23:01 UTC)