Love Letters, Liability, and Fair Housing

By MNR News posted 04-06-2022 14:07

In a heated market where buyers compete for scarce inventory, “love letters” are seen as a way to win a seller’s favor and close the deal. Typically filled with praise and accolades, these letters seem harmless enough. Yet when they reveal personal details about a buyer’s gender, familial status, race, ethnicity, or religion, they stray into a legal red zone. If sellers knowingly reject offers based on the buyer’s protected-class status, they have likely violated fair housing laws—opening themselves and the Realtors® who represent them to liability.

The best way to prevent such complications is to educate your clients about Fair Housing laws and the risks of using love letters to determine whether to accept or reject a buyer’s offer.

Explain that the Fair Housing Act (FHA) protects people in need of housing from being discriminated against based on race, color, religion, national origin, disability (mental and physical), sex, and familial status. They should also know that the Minnesota Human Rights Act adds sexual orientation, marital status, status with regard to public assistance, and creed. Further, some Minnesota cities have added more protected classes. For example, Minneapolis includes ancestry and gender identity, while St. Paul includes age. They should also be aware that there are protected classes, in addition to those listed in the FHA, under Article 10 of the NAR Code of Ethics. These include sexual orientation and gender identity.

Here are some important points you should cover when discussing love letters with clients.
  • Love letters create the potential for sellers to deny an offer based upon the prospective buyer being in a protected class, which would violate fair housing laws
  • Buyers should be discouraged from writing letters that include protected class information
  • Sellers should be strongly discouraged from reading or using any letters that include information regarding a prospective buyer’s protected class status to decide how they accept or reject an offer
  • Help buyers consider alternative ways to make their offer more appealing to the seller other than using love letters that disclose protected class status
  • Encourage sellers to consider rejecting all love letters that contain information regarding the prospective buyer’s protected class status. Have sellers seek legal advice if they choose to review such letters
  • All offers should be evaluated solely on the terms of the offer, i.e., price, contingencies, closing dates, etc.

Risk tip for listing agents: Be sure to keep a record of all the offers that your seller-clients receive, and document their objective criteria for evaluating them, and subsequently accepting or refusing them.

What to do when you receive love letters

Despite your efforts to educate clients and prevent buyers’ agents and facilitators from sending them, some love letters will inevitably land on your desk. So, how do you handle them?

Minnesota law and the Code of Ethics obligates you to provide all offers to your seller clients. Generally, a love letter is likely not considered a part of the offer. However, that will depend on the letter. You should consult with your seller-client at the time of the listing contract to determine whether the seller wants to receive any letters outside of the offer itself.

Given all the risks, even the most carefully written love letter can reveal personal information that could potentially bias the seller. By discussing all the issues upfront at the beginning of your relationship with the client, you can protect them and yourself from legal jeopardy.

Love letters and their perils

Love letters can breach the boundaries of the Fair Housing Act in many ways. Here are a few examples of letters that could potentially bias a seller’s decision.