Is Opendoor Brokerage a scam?
In the United States, RESPA Section 8 and CFPB Regulation X maintain firm prohibitions against kickbacks and unearned fees, with particular statutory exemptions, with regards to settlement services involving most federally related mortgage loans. This includes services provided by all real estate brokers, real estate agents, and Realtors to homebuyers and home sellers.
'No person shall give, and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.' 12 U.S.C. 2607(a). 'Any person or persons who violate the provisions of this section shall be fined not more than $10,000 or imprisoned for not more than one year, or both.' 12 U.S.C. 2607(d)(1).
There is a narrow exemption to this law, for any: 'payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and brokers.' 12 U.S.C. 2607(c)(3). Service provided by a 'real estate broker' is codified under RESPA as a 'settlement service' that is 'provided in connection with a prospective or actual settlement.' 24 C.F.R 3500.2. A mere possession of a 'shell' real estate license does not meet this designation. Opendoor Brokerage is not genuine brokerage acting in a brokerage capacity, but it attempts to meet this exemption as a 'shell' real estate entity.
When Opendoor Brokerage acts as an 'agent-matching service' or a 'referral platform' it may, of course, easily sell customer leads and advertising to real estate brokers. However, under RESPA such sales must never be tied to the outcome of the successful transaction or based on a percentage of brokerages' commissions. The US-CFPB Advisory Opinion issued on February 7, 2023, further confirms that any operator of a 'settlement services' digital comparison-shopping platform receives a prohibited referral fee in violation of RESPA Section 8 when the operator receives a 'thing of value' for referral activity.
Because Opendoor Brokerage does not provide 'service provided in connection with a prospective or actual settlement' when making a referral, the referral is not a bona fide 'settlement service,' and it does not act as a bona fide 'real estate broker,' and it does not meet an exemption for 'payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and brokers.' The scheme cardinally, collects RESPA-prohibited 'fee, kickback, or thing of value' codified under 12 U.S.C. 2607(a), subject to $10,000 fine and a year in federal prison - for each violation. There is no such thing as a 'partner agent' under law, anywhere in the United Satates, and 'shell' brokerages making referrals covered by RESPA do not meet 12 U.S.C. 2607(c)(3) exemption. Both, consumers and honest real estate professionals, should avoid Opendoor Brokerage because it is an illegal scam, that integrally degrades value of real estate services and inflates real estate commissions with exigent kickbacks.
FAQ for Opendoor Brokerage
What are the alternatives to Opendoor Brokerage?
Opendoor Brokerage directly competes with several broker-to-broker blanket referral fee schemes, including Redfin Partner Program, Rocket Homes, Realtor.com Opcity, HomeLight, effectiveagents, Zillow Flex, loanDepot mellohome, topagentsranked, myagentfinder, UpNest, and others.
Genuine alternatives to Opendoor Partner Agents are sellers' agents who offer listing savings and buyers' agents who offer legitimate refunds to consumers. Opendoor is currently under an ongoing investigation by the US-FTC.
What are the pros and cons of Opendoor Brokerage?
Pros: there are none with Opendoor Brokerage. In the United States, price-fixing between licensed brokers is prohibited by the federal antitrust laws, either when buying or selling a home.
Cons: there are several main disadvantages to Opendoor Brokerage. First, consumers are hiring two brokers for the work of one. Second, Opendoor takes a hidden referral fee from Opendoor Partner Agent. Third, Opendoor Partner Agents willingly participate with Opendoor to price-fix their rebates (set at a 30% rebate)
Summary: Opendoor cannot legally organize competing brokers into a referral network because blanket referral agreements, price-fixing, consumer allocation, and market allocation between licensed real estate brokers in the United States are prohibited. 'There is no upfront cost for referrals, and Partner Agents only pay a referral fee to the Opendoor Brokerage if they close on a transaction.' Such is the typical collusion agreement between two licensed brokers, organized into a network.
What is Opendoor Brokerage?
Opendoor Brokerage is a referral fee network designed to collect fees by matching consumers with local real estate agents (Opendoor Partner Agents) willing to pay it. When consumers submit information to Opendoor, their information is often shared in exchange for an undisclosed fee with real estate agents in a process known as a blind match.
Is Opendoor Brokerage legitimate?
No. Opendoor Brokerage is a consumer allocation and a price-fixing scheme between licensed real estate brokers that increases broker commissions and limits consumer choices. Opendoor Brokerage revenue comes from undisclosed referral fees. Blanket referral fees set by such networks range anywhere between 35%-40% of the entire broker's commission. Opendoor Brokerage is a pay-to-play scheme that offers biased matches for financial gain.
The main qualification for real estate brokers who participate with Opendoor Brokerage is their willingness to pay a referral fee. Using its website, Opendoor Brokerage engages in a process known as price-fixing because sets rebate amounts for independent real estate professionals, Opendoor Partner Agents. Price fixing and consumer allocation between licensed brokers are a felony prohibited by federal antitrust legislation.