What Opendoor's $62 Million Dollar Mistake Could Mean for Homeowners
August 11, 2022
It has been a little over a week since the FTC (Federal Trade Commission) finished its investigation into the "iBuyer" company, Opendoor. The FTC alleges that Opendoor Labs, Inc. used misleading information when pitching its service to homeowners.
That alleged deception has now cost the company a cool $62 million.
In the aftermath of the ruling, there have been a lot of opinions voiced on the subject. Some people feel that this is a bad ruling for homebuyers, while others feel that it is good news. So, what's the truth? We'll take a look at both sides of the argument and let you decide for yourself.
Is This Ruling Good for Homeowners?
We can all sympathize with the homeowners who weren't dealt with fairly. But, for the overall real estate market, this "slap on the wrist" is a good omen.
With iBuyers like Opendoor and Zillow seeing major pushback from consumers and legislators, it shines a spotlight on why these large companies lose touch with the market.
Often the issue with iBuyers is their size and appetite for more and more revenue. To sustain their growth and shareholder sentiment, these large companies must continue to scale.
To streamline the buying process, these companies employ A.I. and software solutions for a historically very intimate -- very human -- transaction.
Buying or selling a home is a major milestone in most people's lives and should be handled on a very human level. This is especially the case when a homebuyer is being forced to sell their home due to a major difficulty in their life.
This is where large companies lose their way - they prioritize numbers, not people.
I think you can see where our bias lies here, but we did say we'd present both sides of this evolving story. So, here is why some people think the ruling against Opendoor is a bad thing.
Is This Ruling Bad for Homeowners?
Yes, sort of.
An argument -- a strong argument -- can be made that this ruling will cause Opendoor to slow or maybe even halt its homebuying program, if only for a while. This halt in buying would no doubt reduce homeowners' options when looking to sell their homes.
Companies like Opendoor buy many houses, so the void they leave would be felt.
The worst-case scenario for homeowners is if Opendoor doesn't slow its homebuying program, but feels pressure to make up for the $62 million they "lost." This pressure would conceivably push the company to acquire even more homes with better profit margins.
This profit margin math doesn't work in the homeowners' favor.
What Can Homeowners Learn from the FTC ruling on Opendoor
When it comes time to sell your home, it pays to develop a 1-to-1 relationship with the person or company looking to buy your house. With iBuyers, this relationship is almost impossible to build.
Large corporations parade as people, but they focus on scale, which means you are one amongst hundreds, maybe thousands of transactions they're trying to push through. Add to that, you might be speaking with a robot half the time and getting offers based on what an A.I. thinks your home is worth.
When you (as a person) aren't the focus of the sales process, the whole deal becomes a game of separating you from your property with the largest possible profit margin.
Even if you aren't attached in any way to the house you're selling, you should learn the names and faces of the people you're dealing with. A human connection is the best way to gauge whether or not you'll receive a fair deal at the closing table.
Are you able to call and speak with your buyer directly?
Have they physically come out to see the property?
Are they upfront with what they aim to do with the house?
Do they explain the factors behind their offer?
If you can say 'yes' to these questions and are fostering a relationship, you're giving yourself the best chance of avoiding a bad deal.
This is how we’ve been doing business for over a decade, and it’s why our CEO, Martin, still works with each and every one of our clients on a personal level.
It’s “old-school,” but it works, and it’s why our clients love us.
Ultimately, this FTC ruling highlights bad practices and makes companies more aware of what not to do in this industry. Hint: Don't screw over your customers.
Time will tell whether this story gets enough coverage to sway the market, but we think homeowners only benefit from rulings like this one.
If these iBuyers retool their strategy to provide a more personalized, transparent service - great! The consumer wins.
More likely, though, we'll see more instances where the FTC has to step in on behalf of homeowners to protect their interests - maybe not with Opendoor, but with the next iBuyer.
What do you think about this ruling? Do you think it signals what's to come for iBuyers, or is it just a momentary blip on the radar? Have you done business with Opendoor?
Let us know in the comments, or tag us on social media!
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