Real estate regulators in North Carolina have disciplined Opendoor over several disclosure issues on the homes the iBuyer listed for sale.
According to Opendoor and The North Carolina Real Estate Commission, this is the first time it has been disciplined in the state. The iBuyer launched its services in North Carolina in 2018.
The NCREC detailed the disciplinary actions in its April bulletin. As a result of the disclosure issues, on March 10, 2022, the NCREC suspended Opendoor’s brokerage license in the state, however, as the bulletin notes the commission stayed the suspension the same day. This means that Opendoor’s license and the firm can continue its operations in the state.
“Opendoor Brokerage is still an active brokerage in North Carolina,” an Opendoor spokesperson wrote in an email to RealTrends. “We look forward to continuing to service customers in the state, eliminating the friction they have been enduring in the traditional real estate transaction for decades. Our intent is to provide transparency to buyers and their brokers in order to facilitate an informed decision.”
Opendoor currently has over 3,000 homes listed for sale in North Carolina.
The iBuyer was able to remedy the suspension through a combination of instituting new policies within the company and having their brokers take a remedial course from the NCREC on common disclosure problem areas and a refresher post licensing course.
“This was the first time we’ve had a complaint against them that went that far, so we gave them a chance to fix the issues and move on,” Janet Thoren, legal counsel for the NCREC, said.
The NCREC bulletin highlights disclosure errors on three specific properties. On one property, the Opendoor “broker” failed to ensure that the seller client had addresses all the material issues noted on a previous buyer’s home inspection report before re-listing the property. The Opendoor broker also failed to disclose any outstanding material items that were not corrected, the NCREC said. In addition, the broker initially advertised the property as having an outdoor pool, and hardwood and tile floors, which it did not.
With the second property, the bulletin states that the broker failed to pull the home’s septic permit prior to listing the property. As a result, the broker listed the property as a five-bedroom home, when the septic permit only allowed for three bedroom occupancy, the NCREC bulletin says.
Finally, in the third transaction, an Opendoor vendor “buried parts of the outdoor pool beneath the back yard instead of removing it all from the property.” The home seller has since taken the home off the market and excavated and removed all of the item buried in the yard. In addition, the bulletin states that: “The listing agreement with Opendoor Brokerage LLC’s broker failed to include her license number and failed to comply with Commission rules by not placing the fair housing language in a clear and conspicuous manner.”
Thoren said that the NCREC identifies potential violations through a variety of channels including consumer complaints lodged with the organization, local news stories and referrals from other agencies. After a potential violation is identified, the complaint is investigated and reviewed by one of the attorneys on staff. If the attorney feels disciplinary action is warranted, it is referred to the board, which could result in a hearing before the full board.
According to Thoren, the types of disclosure errors made by Opendoor are pretty common.
“They are common mistakes that brokers make in terms of advertising and not being diligent in checking permits and things before they advertise the features of a property,” Thoren said. “I also believe that they mixed up the features of two different properties in one of their advertisements. I don’t think there was anything malicious intended with this mistakes, it was just negligence. If there are intentional errors or systemic errors, then we take a different approach to our discipline.”
Like other iBuyers on the market, Opendoor came under scrutiny after Zillow killed off its iBuying program in early November of 2021. In 2021, the company recorded a net loss of $662 million, a 161% increase over its 2020 net loss and well above Zillow’s 2021 net loss of $528 million.
However, these losses came as the firm rapidly expanded, entering over 20 new markets in 2021. In addition, Opendoor resold 21,725 of the homes it bought in 2021, up 119% from 2020. It had $5.7 billion in unsold real estate inventory at the time of its full year 2021 earnings call with investors.
On Tuesday, Opendoor announced it was launching its iBuying operation in parts of north and central New Jersey, as well as parts of New York, including Long Island and sections of the lower Hudson Valley. Earlier this year the iBuyer announced the launch of is San Francisco Bay Area market. Opendoor is currently operational in many major markets across the country, including New York, New Jersey, San Francisco, Washington, D.C., Miami and Los Angeles.
This story was updated to include information and quotes from NCREC legal counsel.
