Beyond Love Letters

January 4, 2021

- By Stephen M. Perry

Many articles and blogs have been written concerning the potential perils to brokers and their seller-clients under the Fair Housing Act of accepting so-called love letters from prospective buyers. The FHA prohibits discrimination in housing based on race, color, national origin, religion, sex, familial status, and disability. These articles and blogs point out that letters from prospective  buyers who seek to ingratiate themselves to the seller are likely to disclose information about the buyers’ demographic characteristics such as their religion or, especially likely, their family status. If the seller decides to sell to a prospective buyer who furnished such a love letter, the concern is that a disappointed suitor for the home who made a better offer might claim that the sale was wrongly influenced by demographic information contained in the love letter, such that there has been a violation of the anti-discrimination provisions of the Fair Housing Act. For this reason, numerous commentators have recommended that agents agree with their sellers not to accept any such love letters at all.

Is this a realistic peril? Perhaps, even though the articles concerning this issue have not reported any claims made on this theory. Suppose for example that a house is sold to a couple named John and Mary whose love letter goes no further than describing their family and children and how much they loved the house. Further, suppose that there was a gay couple with strong credit who had offered more for the house but were not chosen – as they learn when they later see the price at which the house was sold. If the spurned prospective buyers asserted a claim in that situation, the seller would need to come up with bona fide reasons for choosing the lower offer, such as fewer contingencies or better credit; even then, whether there had been discrimination could present a triable issue of fact for a tribunal. It is for this reason that the commentators advise real estate agents to agree with their clients that love letters will not be accepted or passed on to the client.

But just describing the hypothetical problem that love letters may entail makes clear that the perils under the FHA of choosing buyers can go far beyond such letters. And refusing to accept them does not resolve the issue of potential seller bias in choosing among competing offers.

You may recall that this past summer, researchers published an article highlighting the discrimination faced by black prospective renters in the Boston area housing market. In the words of the Boston Globe, the study found “that Black people posing as prospective tenants in Greater Boston were shown fewer apartments than whites and offered fewer incentives to rent, and that real estate agents cut off contact when the renters gave Black-sounding names like Lakisha, Tyrone, or Kareem.”

Even without love letters, the demographic characteristics of prospective buyers can in many cases, be inferred just from their names. A buyer’s name may sound Irish, Italian, Asian, African-American, Hispanic, Mid-Eastern, or none of the above. Same sex couples will usually have first names that disclose as much. Some names may be associated with being Jewish, Muslim or Christian. It is easy to see how conscious or unconscious bias in favor of or against certain groups could easily sway a seller to prefer one offer over another.

Accordingly, even without accepting a “love letter” a seller (and potentially the seller’s real estate agent) may be vulnerable to claims that the FHA was violated any time that the seller decides to sell to a buyer who did not, based on objective criteria, make the best offer. And the purchase price will eventually be available for all to see. Apart from the purchase price, objective criteria that a seller may lawfully take into account include such things as closing date, finance, inspection and other contingencies, and creditworthiness. But “fitting into the neighborhood” should definitely not be considered.

Prior to deciding among competing offers, the agent should discuss with the seller what lawful factors are most important to the seller. If the seller’s agent runs into a situation where the seller seems to be rejecting what objectively appears to be the best offer based on improper factors, such as the perceived sexual orientation, ancestry, race, religion, or family status of a prospective buyer, it is morally and legally incumbent upon the agent to speak up. In such a situation, agents should do all they can to ensure that the seller’s decision is not the product of conscious or unconscious bias and is focused on objective factors pertaining to the offer that make it superior to all of those that were rejected.  This is important not only to protect against potential FHA claims, but also to carry out the important non-discrimination purposes of the statute.