Home may be where the heart is, but playing with a seller’s emotions could lead to trouble.
In competitive housing markets, agents sometimes encourage buyers to write “love letters” in hopes of swaying the seller to choose their bid. But experts are increasingly warning that these missives could lead to discrimination.
The problem is that such letters often contain personal information and reveal characteristics of the buyer, such as race, religion or familial 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 can mean losing out on a dream home. Meanwhile, the seller risks rejecting a solid deal and possible legal repercussions.
“In a perfect world, the ability to purchase a home and the capacity to get it done should be based solely on your qualifications. Do you have the capacity to make a purchase?” says Lionel Lewis, a broker at New Era Real Estate Group in Cleveland. “But we don’t live in a perfect world. We live in a society where, unfortunately, many determinations are made based solely upon race, ethnicity and things of that sort.”
Does it still pay to write a seller letter?
The National Fair Housing Alliance has not taken a position regarding whether the real estate industry should do away with buyer love letters. But one of its biggest concerns is that there is little standardization with respect to the use of the love letters. That means using them – or not using them – could result in bias.
“We urge caution around using love letters and encourage real estate professionals to obtain fair housing training regarding how to provide guidance 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 seller, Rice warns that a letter might not always have the desired effect.
“There are some agents that say, ‘hey, look, attach this letter to sell you, to sell your family, to convince the seller that they should pick you over this institutional investor who is bringing cash to the deal,’” says Rice. “You know that may work, but then again, it may backfire.”
Information contained in the love letter might promote a discriminatory outcome. For example, if a homeseeker provided information about familial status, religious beliefs, race, ethnicity, or ability status, this information might be used against them.
What do sellers need to 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 NFHA invariably gets is: “I’m looking out for my neighbors, these are my friends.”
But she says that shouldn't be a seller's concern. “People are thinking who is going to buy my house? Who am I moving into the community? Who is going to move next door to this neighbor that I regard as my extended family member? So people do have those personal considerations,” says Rice
To avoid fair housing violations and costly liability, she says sellers need to know what a protected class is as well as what characteristics constitute a protected class under the Fair Housing Act.
The Fair Housing Act prohibits the denial of housing to a person based on the person’s membership in one or more protected class. The protected classes are race, color, religion, national origin, sex, familial status and disability.
Nick Libert, broker-owner of Exit Strategy Realty in Chicago, notes there are plenty of chances for discrimination with or without a letter. For example, social networks serve as conduits for information.
“What I tell people is on the way in or on the way out of a home, it’s kind of like going to a cocktail party,” he says. “You probably don’t want to bring up politics or religion, but at the same time you also need to be aware of what you have online when you go to buy or sell a house.”
If you do write a seller letter, what should be included?
If you want to send a love letter to the seller, the National Association of Realtors recommends asking an attorney to review it.
“Typically, love letters in and of themselves do not constitute a violation of fair housing laws,” says Rice. “However, guidance 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 homeseeker to submit a love letter but did not advise a female homeseeker to submit a love letter, this might constitute a violation of federal or state fair housing laws.
To boost the odds of staying out of fair housing trouble, experts suggest focusing solely on the merits of the offer, such as the price and terms, likeliness of the sale to close and financial condition of the buyer.
Lewis recommends focusing on financial qualifications and what owning that home would mean to you. It could be seeking out a better school district, upgrading to a larger home, downsizing or a desire to be closer to family members.
“Zeroing in on it from the perspective of bringing out your race and family background, that could be just as big a detriment as it could be something that enhances your status or your capacity to get the home of your choice,” he says.
Put simply, the focus should be on what a buyer can bring to the closing table.