Home may be where the heart is, but toying with a seller’s emotions can lead to problems.
In competitive real estate markets, agents sometimes encourage buyers to write “love letters” in hopes of enticing the seller to choose their offer. But experts are increasingly warning that such missives could lead to discrimination.
The problem is that these letters often contain personal information and reveal characteristics of the buyer, such as race, religion or marital status. These facts could then be used, knowingly or through unconscious bias, as an unlawful basis for a seller’s decision to accept or reject an offer.
For the buyer, this may mean losing a dream home. Meanwhile, the seller risks rejection of a strong deal and possible legal repercussions.
“In a perfect world, the ability to buy a home and the ability to do so should be based solely on your qualifications. Do you have the ability to make a purchase?” says Lionel Lewis, broker at New Era Real Estate Group at Cleveland: “But we don’t live in a perfect world. We live in a society where, unfortunately, many decisions are made solely on the basis of race, ethnicity and things like that.”
Does it always pay to write a letter to the seller?
The National Fair Housing Alliance has not taken a position on whether the real estate industry should remove buyer love letters. But one of her biggest concerns is that there’s little standardization when it comes to the use of love letters. This means that using them – or not using them – could lead to bias.
“We urge caution in the use of love letters and encourage real estate professionals to undergo fair housing training on how to provide advice to consumers who wish to use them,” says Lisa Rice, President and CEO of the National Fair Housing Alliance.
While letters can be a way to establish a more personal connection with a salesperson, Rice cautions that a letter may not always have the desired effect.
“There are agents who say, ‘Hey, listen, attach this letter to sell yourself, to sell your family, to convince the seller that they should choose you over this institutional investor who brings money to the transaction ‘” says Rice. . “You know it can work, but again, it can backfire.”
The information in the love letter could favor a discriminatory outcome. For example, if a foster applicant provided information about their family status, religious beliefs, race, ethnicity, or abilities, that information could be used against them.
What should sellers know about accepting a letter?
Rice points out that when sellers are taken to court and asked why they rejected a potential seller, one of the responses the NFHA invariably gets is, “I watch over my neighbors, they’re my friends.”
But she says that shouldn’t be a seller’s concern. “People wonder who is going to buy my house? Who am I integrating into the community? Who is going to move next to this neighbor whom I consider a member of my extended family? So people have these personal considerations,” Rice says.
To avoid fair housing violations and costly liability, she says sellers need to know what a protected class is as well as what features constitute a protected class under fair housing law.
The Fair Housing Act prohibits the denial of housing to a person on the basis of membership in one or more protected classes. The protected categories are race, color, religion, national origin, sex, marital status and disability.
Nick Libert, broker-owner of Exit Strategy Realty in Chicago, notes that there are many opportunities for discrimination with or without a letter. For example, social networks serve as information channels.
“What I tell people is coming in or going out of a house is kind of like going to a cocktail party,” he says. “You probably don’t want to talk about politics or religion, but at the same time you also need to be aware of what you have online when buying or selling a home.”
If you’re writing a letter to the seller, what should you include?
If you want to send a love letter to the seller, the National Association of Realtors recommends having a lawyer review it.
“As a general rule, love letters by themselves do not violate fair housing laws,” Rice says. “However, advice that a real estate professional might give to a consumer could result in a violation of the law.”
For example, if a real estate agent advised a male foster home seeker to submit a love letter but did not advise a female foster seeker to submit a love letter, it could be a violation of federal law or states on fair housing.
To increase the chances of staying away from fair housing issues, experts suggest focusing only on the merits of the offer, such as price and terms, likelihood of closing the sale, and financial status. of the buyer.
Lewis recommends focusing on financial qualifications and what owning that home would mean to you. It could be finding a better school district, upgrading to a bigger house, downsizing, or wanting to be closer to family members.
“Focusing on that from the perspective of bringing out your race and family background could be as big a detriment as it could be something that improves your status or your ability to get the home of your choice,” he says. .
Simply put, the focus should be on what a buyer can bring to the closing table.