The Federal Trade Commission has announced a proposed order that would require Tempe, Ariz.-based Opendoor Labs to pay $62 million following an investigation that found the company deceived potential homesellers into believing its homebuying service was cheaper than selling the traditional way.

Opendoor operates an online real estate business that, among other things, buys homes directly from sellers as an alternative to selling their homes on the open market. Advertised as an “iBuyer,” Opendoor claimed to use cutting-edge technology to save consumers money by providing “market-value” offers and reducing transaction costs compared with the traditional home sales process.

According to the FTC’s investigation, Opendoor allegedly used “deceptive practices” to trick homesellers into thinking that they could make more money selling their home to Opendoor than on the open market using the traditional sales process.

Opendoor’s marketing materials included charts comparing their consumers’ net proceeds from selling to Opendoor versus on the open market. According to the FTC, those charts almost always showed that consumers would make thousands of dollars more by selling to Opendoor, when, in reality, the vast majority of consumers who sold to Opendoor actually lost thousands of dollars compared with selling on the traditional market. The FTC alleges this is because the company’s offers were below market value on average and its costs and fees were higher than what consumers typically pay when using a traditional Realtor.

“Opendoor promised to revolutionize the real estate market but built its business using old fashioned deception about how much consumers could earn from selling their homes on the platform,” FTC Bureau of Consumer Protection Director Samuel Levine said. “There is nothing innovative about cheating consumers.”

The FTC alleged Opendoor pitched potential sellers using misleading and deceptive information, and in reality, most people who sold to Opendoor made thousands of dollars less than they would have made selling their homes using the traditional process.

As part of the proposed order, Opendoor must:

• Pay $62 million which the FTC will use for consumer redress.
• Cease all deceptive, false and unsubstantiated claims it made to consumers about how much money they will receive or the costs they will have to pay to use its service.
• Provide competent and reliable evidence to support any representations made about the costs, savings or financial benefits associated with using its service and any claims about the costs associated with traditional home sales.

The commission voted unanimously to accept the consent agreement which will be published in the Federal Register and subject to a 30-day public comment period after which the commission will decide whether to make the consent agreement final.