The Federal Trade Commission (FTC) issued an administrative order against online homebuying firm Opendoor Labs Inc. for allegedly cheating potential homesellers 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.

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

Under the FTC’s proposed administrative order, Opendoor will have to pay $62 million and stop its deceptive tactics.

“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,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection. “There is nothing innovative about cheating consumers.”

Based in Arizona, Opendoor buys homes directly from consumers as an alternative to consumers selling their homes on the open market. The company claimed it used cutting-edge technology to save consumers money by providing “market-value” offers and reducing transaction costs compared with the traditional sales process.

Opendoor’s marketing materials included charts comparing their consumers’ net proceeds from selling to Opendoor versus on the market. The FTC said those charts almost always showed that consumers would make thousands of dollars more by selling to Opendoor.

However, the FTC determined the company’s offers have been below market value on average and its costs have been higher than what consumers typically pay when using a traditional Realtor.

Opendoor agreed to:

• Pay the commission $62 million, which is expected to be used for consumer redress.
• Stop making deceptive, false and unsubstantiated claims 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 FTC said it will publish a description of the consent agreement package in the Federal Register soon. The agreement will be subject to public comment for 30 days, after which the agency will decide whether to make the proposed consent order final.