Real Estate

Buyer ‘Love Letters’ – At What Point Does it Violate Fair Housing?

In real estate, ‘love letters’ are used to describe a document that a potential buyer uses to convince a seller that they are the perfect match for them.

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Love Letters.

Before cell phones, we sent them to our grade school crush as a paper plane. At other times, we folded the letter to make a paper football. After cell phones, love letters became text messages – making our expression of interest more efficient.

But how are love letters being used these days? Specifically, how are they being used in real estate, and at what point does it violate fair housing?

What are Real Estate Love Letters?

In the real estate industry, the term ‘love letter’ is used to describe a document that a potential buyer uses to convince a seller that they are the perfect match for them, generally indicating why they are best qualified. Details about the family, and their interest in why they deserve the home are included in the letter.

Love letters are usually accompanied by a written purchase offer.

Are Love Letters A Buyer’s Last Option?

The U.S. Real Estate Market Today.

Despite the Pandemic, there has been a great housing boom in the United States. Eight years of strong house price growth doesn’t seem to have slowed.

A number of cities have reported significant growth over the course of the last few years, as shared by Realtor.com.

A Housing Boom, but Not Enough Inventory.

There is a significant demand in today’s housing market. On average, sellers are receiving 4.8 offers for every home sold.

Prospective home buyers are frustrated, submitting as many as 34 offers to have a shot at buying a property. Some, are trying to cut through the noise by waiving their contingencies.

Private investors are trying to expand their portfolios by offering cash for parcels in various markets. Tech companies and fund management conglomerates are bulk-buying real estate assets to convert homes into rentals – leaving many buyers and their respective agents desperate to think outside the box.

How Are Buyers Forced to Think Outside the Box?

Some ways that buyers have stood competitive in today’s market include:

  1. Waiving some or all contingencies.
  2. Paying cash for homes.
  3. Taking advantage of short sale or foreclosure opportunities.
  4. Submitting a premium above appraised values.
  5. Attaching a ‘Love Letter’ with offers.

Potential Problems That Can Arise with Homebuyer Love Letters.

There are a number of issues that can arise when using a love letter. While it is certainly legal for buyers to submit a letter of interest, many experts advise being extremely careful to avoid violating laws that protect against housing discrimination.

Buyer love letters are generally used to gain a competitive edge. The letter may disclose information about a buyer’s race, religion, or one’s family status, including marital status, age, and children.

In a 2020 article titled “Love Letters or Liability Letter?”, the National Association of Realtors (NAR) warned that the practice may make sellers and agents vulnerable to accusations of discrimination, as love letters often disclose personal details about a prospective buyer.

Last year, Oregon became the first state to ban ‘buyer love letters’ after Governor Kate Brwon signed House Bill 2550 in June. The law requires seller’s agents to reject direct communications from buyer to seller, outside the scope of a transaction offer. On Wednesday, a U.S. District Judge Marco Hernandez permanently blocked the ban, citing a violation of buyers’ First Amendment rights.

Fair Housing: Rights and Obligations

It is illegal to discriminate in the sale or rental of housing, including against individuals seeking a mortgage or housing assistance, or in other housing-related activities, according to the U.S. Department of Housing and Urban Development. Moreover, The Fair Housing Act protects people from discrimination against race, color, national origin, religion, sex (including gender, gender identity, sexual orientation, and sexual harassment), familial status, and disability.

As buyer love letters may be regarded as a form of marketing and advertising, it is also considered illegal for any marketing material to suggest a preference, limitation, or discriminate because of race, color, or any other protected class.

Some examples of advertising that may violate the Act include phrases such as “no children,” which indicates discrimination on the basis of family status, or “no wheelchairs,” which indicates disability discrimination.

A buyer or their respective agent may be accused of violating the law if a buyer’s love letter includes statements such as “We are a happy same-sex couple,” or “We are a peaceful family of four.” The phrases indicate sexual orientation and familial status, which are both protected in the Act.

How To Avoid Being Accused?

To avoid the possibility of being accused of housing discrimination, it is advisable to keep homebuyer love letters brief and to the point.

Love letters are not only used to identify buyers but are also used to market a property. It is important to be aware of what constitutes a violation of the law.

To further avoid accusations of discrimination, agents should also avoid submitting love letters that disclose information about a buyer’s race, religion, or one’s family status, including marital status, age, and children.

While it’s argued that a ban on love letters violates a buyer’s First Amendment rights, it is also argued that the letters are a form of marketing and advertising, and therefore, may still constitute an illegal or unethical practice.

In the end, agents, buyers, and sellers should be aware of the potential consequences of using love letters and should exercise caution when submitting them.

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