A copy of the request filed with the DOJ and FTC asking to review practices of Offerpad.
Copy of author’s official request that asks the United States Federal Trade Commission and the United States Department of Justice to investigate Offerpad LLC on the grounds of an alleged violation of the Federal Trade Commission Act of 1914, an alleged violation of the Sherman Antitrust Act of 1890, as well as any other possible violations of antitrust and consumer protection laws currently ratified and enforced in connection with unlawful kickbacks, price-fixing, and improper incentives to listing agents.
Attn: Citizen Complaint Center, Antitrust Division
Department of Justice
950 Pennsylvania Ave., NW Room 3322
Washington, DC 20530
Attn: Office of Policy and Coordination
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Ave. NW Room CC-5422
Washington, DC 20580
Please find the information below with regards to possible antitrust violations.
2150 E Germann Rd, Suite 1
Chandler, AZ 85286 US
Phone: (844) 388-4539
Further, an unknown number of licensed real estate brokers who choose to execute blanket referral agreements with Offerpad while registered and acting as licensed brokers in any State.
Offerpad operates as a real estate investor, otherwise known as iBuyer. As part of their operations, Offerpad improperly offers financial incentives to listing agents to help convince consumers to take lower-priced offers from the company, instead of listing homes on the open market.
It is a well-known fact that iBuyer offers, accounting for fees and reduced market value, are systematically the most expensive way to transfer home ownership. Accepted iBuyer offers typically result in 15%-20% in total equity loss to a home seller. Most sellers systematically refuse low offers from iBuyers and some iBuyers operate of an average 2% success rate. For example, in 2018, out of 60,000 instant offer requests reported by Zillow Group, only 600-700 homes got sold with Zillow Offers.
In this scheme, a listing agent is offered an improper financial incentive from Offerpad to bring their client to the company for a pre-market offer. No real estate investor should be able to offer any financial incentive to a third-party representative to persuade others to accept their offer. By offering a fixed financial incentive (currently set at 3% referral fee) to listing agents upon acceptance of an Offerpad offer, the company acts to create a conflict of interest between a listing agent and their (present, or potential) client.
A listing agent, in this case, has to choose between having to represent a consumer to sell a home in the open market and getting a “quick cash” for handing them off to Offerpad.
According to Offerpad: “following a successful close, the agent will receive a 3% referral fee. Eligibility for the referral fee requires that the client’s home has not been listed on the MLS or received an Offerpad cash offer in the past 30 days, and that the agent must be identified in the offer request, continue to represent the seller, be available throughout the process, and the sale must successfully close."
Today, the company offers a 3% referral fee to listing agents, tomorrow, Offerpad decides to set this incentive at 4%, 5%, 6%, 7%, or some other pre-fixed amount. Such incentives are a form of price-fixing and directly affect listing agents’ ability to work with their clients on fair terms.
As a property buyer, Offerpad claims to have paid nearly $100 million in commissions and referral fees to brokerages across the country over the recent years in operation. All home buyers, including Offerpad, must legitimately place offers on homes without enticing listing agents with fixed compensation amounts.
The act of offering a pre-set incentive to a listing broker is a form of price-fixing. This fee is agreed upon in advance between Offerpad and the listing agent, and not negotiated between the listing agent and their true client – the seller of the home. In this scheme, the seller is subjected to a pre-set referral fee between third parties in their self-interest, and without any recourse. Instead of helping the seller list their home in the open market, the listing agent is now steered toward a specific buyer that has no obligation whatsoever to make a fair market offer on any home.
The agreement for a pre-negotiated “blanket” 3% referral fee between any listing agent and Offerpad is an example of a clear-cut agreement designed to restrain free trade. The purpose of the fee is to incentivize the listing agent to act against their client’s best interest.
In a typical home sale, a listing agent receives their commission from the proceeds of the seller and the seller may easily negotiate a listing commission with their agent. In the case of Offerpad 3% referral fee scheme, the seller not only steered toward a lower-priced offer on their home but further has no mechanism for negotiations of a representation fee with their agent.
I currently serve as a CEO HomeOpenly. HomeOpenly is an Open Real Estate Marketplace™ designed to provide home buyers, home sellers, and real estate agents with a transparent representation search experience. HomeOpenly is built as an Internet service to improve the homeownership experience in the United States.
The core feature of the platform allows home buyers and sellers to receive live and actionable savings from local competitive real estate agents, including listing rates, home buyer’s refunds, and flat fees. HomeOpenly service is absolutely free and does not tax our users with referral fees.
HomeOpenly does not lock anyone into any specific rates or rebates — competitive market forces guide the process. HomeOpenly doesn’t fix prices, instead, we maintain the fair and open competition at the core of our platform.
HomeOpenly is not a real estate broker, and we never intend to become one. HomeOpenly is always an Internet technology company. With my request to the Department of Justice and the Federal Trade Commission, I am seeking a fair and open competitive environment to develop our service. Successful implementation of an Open Marketplace™ platform requires full enforcement of existing antitrust laws that are enacted to protect US consumers.
As long as businesses can practice consumer allocation, and price-fix services of independent brokers with the use of blanket referral agreements advertised with heavy use of paid Internet channels, an Open Marketplace™ operates at a competitive disadvantage and suffers damages as a result.
If you have a question or comment about an antitrust issue, you may submit it to the Bureau of Competition at the United States Federal Trade Commission and/or to the Antitrust Division of the United States Department of Justice
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Feel free to contact us if you need further assistance. At HomeOpenly we aim to make the opportunity of homeownership transparent, affordable and an open experience.