A law passed in Oregon last summer banning so-called buyer “love letters” in real estate transactions was halted by a federal judge last week, though the narrow decision seemingly did not rule out a more targeted ban on the practice that would narrowly apply to fair housing and discrimination.
In a 29-page opinion District Judge Marco Hernandez focused on the specific text of the bill that went into effect at the start of this year, saying that it was overboard and “has the effect of significantly limiting truthful, nonmisleading speech.”
After Oregon governor Kate Brown signed the bill into law, a local real estate firm sued the state, arguing that banning love letters would lead to “many angry and dissatisfied clients” and prevent agents from finding creative ways to compete with higher offers.
Long a controversial practice in real estate, the use of personalized communications delivered with an offer on a home intended to make that offer more emotionally appealing in a competitive market can potentially run afoul of fair housing laws, as sellers could be accused of choosing a buyer based on protected characteristics like race, religion or national origin. The National Association of REALTORS® has recommended finding alternatives to make an offer stand out and avoiding love letters.
Hernandez called the goal of preventing these biased decisions “laudable,” but ruled that the text of the law—which was introduced by Mark Meeks, a real estate broker/owner who has also served as a state representative since 2017—was not specific in how it defined these communications.
“ shown that racial disparities in homeownership persist in Oregon. They have shown that most love letters contain protected characteristics, including a prospective buyer’s race or color. They presented evidence that conscious and unconscious bias are ongoing problems in American society and effect decision-making processes. “Hernandez wrote. “Plaintiff did not introduce any evidence that rebuts, or even casts doubt, on these findings.”
The law banned “communication other than customary documents in a real estate transaction, including photographs, provided by a buyer,” which Hernandez argues will unconstitutionally limit appropriate or innocuous communications from buyers to sellers.
“Even if targeted love letters alone, Plaintiff has shown that love letters contain significant amounts of speech beyond references to a buyer’s personal characteristics,” Hernandez wrote.
Hernandez discussed a handful of alternatives to this wholesale ban, including requiring agents to redact all references to protected characteristics before delivering a love letter or only banning photographs.
The Oregon legislature previously rejected a plan to require agents to review and redact love letters.
“Senate hearing testimony suggests legislators rejected this approach because they were concerned about censorship and liability for real estate agents,” Hernandez said.
Adam Davis, a RE/MAX agent in Portland, told RISMedia late last year that he is cautious even communicating with clients about local sports fandoms—not necessarily due to this bill, but because the issues are so complex and sensitive.
“I want to be careful with that, because it sounds like it can veer into fair housing issues,” he says.
Real estate educator and author Marki Lemons Ryhal, speaking to RISMedia last month, pointed out that higher-ranking or leadership positions in real estate are mostly likely to receive fair housing education, and everyday agents don’t always receive that more extensive training, with increased education another alternative Hernandez proposed to a love-letter ban. Federally protected characteristics also extend beyond race or religion and can be very nuanced, she adds, and some jurisdictions have stricter or more extensive fair housing laws.
“Our fair housing courses include federal, state, county and city fair housing rules,” she says. “I think that as real estate professionals, we’re going to need more education.”
Jesse Williams is RISMedia’s associate online editor. Email him you real estate news ideas to jwilliams@rismedia.com.
Legally banning “love letters” is a step too far, likely intruding on first amendment rights of free speech. But prudent agents and brokers will caution both buyers and sellers of the risk that fair housing violations might be included in those seemingly innocent “love letters” sent from buyers to sellers.
When emotions run high in competitive markets, buyers naturally look for ways to set themselves and their offers apart. They often don’t know enough about fair housing laws to know when they are breaking (or inducing a seller to break) the law. The well-intentioned “love letter” can cloud a seller’s good judgment and induce a decision based on the characteristics of the buyer rather than on the factual terms of the offer. This usually is the underlying violation that leads to a housing discrimination lawsuit.
It’s the duty of agents to encourage their clients to become educated about fair housing laws. Many, if not most, buyers and sellers are surprised about the limitations they face in buying and selling homes. When you offer a home for sale to the public, it must include ALL of the public. You can limit the prospective buyers to those who can show they are financially qualified, but that’s basically the only significant limitation allowed to sellers. Excluding buyers by race, color, religion, national origin, sex, familial status, and disability are not allowed under federal law. (Age can be restricted only in communities that legally have been set aside for senior adults.) You cannot cherry-pick the buyer to satisfy your own desire to keep the home in “good hands”.
All parties to a violation, including brokers and agents, can be sued by a buyer who loses out on a property purchase due to a fair housing violation. Financial penalties, license suspensions or revocations, and other remedies can make life very difficult for the real estate professionals.
Be careful about “love letters”. Make sure your client’s offer is the best it can be without resorting to the “love letter” tactic. You can’t prevent your client from writing and mailing a letter, but you can discourage it in writing to your client (with a copy to your broker), so that you have a record to show the court if there should be a lawsuit. And make no mistake, there are opportunists out there eager to cash in on agents and brokers perceived to have deep pockets!