[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)