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April 4 (UPI) -- Some 55,000 home sellers who used Opendoor Technologies to sell their house stand to receive a rebate of more than $1,000, the Federal Trade Commission announced Wednesday. The real estate company settled a lawsuit claiming it misled sellers into selling their houses for a lower price than what they may have been able to get on the open market.
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The FTC said the average refund will be about $1,024, according to the Commission's refund tracker.
Over the past decade, Opendoor has become one of the most high-profile instant-buyer real-estate companies, which are also known as iBuyers. These firms buy homes from homeowners directly, rather than serving as a broker on the open market between sellers and other buyers.
Opendoor had "claimed to use cutting-edge technology to save consumers money," the FTC said, by "submitting offers at market value" and "reducing transaction costs compared with the traditional home sales process."
But the commission said that was deceptive because home sellers were misled into thinking that they could make more money by selling with Opendoor than by selling traditionally, on the open real-estate market.
"In reality, most people who sold to Opendoor made thousands of dollars less than they would have by selling their homes using the traditional process," the agency said. "Many paid more in costs than what sellers typically pay."
Tempe, Ariz.-based Opendoor said in a 2022 statement that while it disagreed with the FTC's allegations, it decided to settle a lawsuit brought against it by the commission, and agreed to refund home sellers for misleading them with deceptive practices.
Opendoor and other iBuyers make money by buying homes at discounted prices and "flipping" -- or selling -- them quickly.
Tomasz Piskorski, a professor at Columbia Business School, has studied the business model.
"They have to buy homes at somewhat of a discount relative to the average market value. ... You cannot break even with this business model if you cannot buy at a discount," he explained.
These instant-buyer real estate companies buy homes at a 3.6% discount relative to the amount a homeowner could get by selling their home on the open market, based on Piskorski's analysis. A homeowner selling a $400,000 home, for example, would typically make about $14,000 less if they were to sell to an iBuyer instead of to a traditional home buyer.
"In some ways, the companies provide an economic premium," Piskorski explained. People are able to sell their homes more quickly, but "it comes at a price -- that convenience comes at the cost of selling the home at a discount," he added.
The refunds will total more than $62 million.
