If you’ve ever bought a home, you’ve probably written one. If you’ve ever sold a home, you’ve probably received one. They are called “buyer love letters” and their purpose is to convince sellers to accept their offers. But these letters can also be legally dangerous… for sellers.
When it comes to making an offer stand out from the rest, buyers will often write “love letters” to sellers with plenty of gushing compliments about the home, and promises about how the home will be maintained. But some lawyers say they create a “seller beware” situation, because they can also make sellers vulnerable to discrimination lawsuits.
These letters seem innocent enough. They are usually personal missives about a family’s desire to own a home, with details and possibly photos of the family. And here’s where sellers can run into trouble. Once a seller knows these details about the potential buyers, any offer rejection could be misconstrued as a bias, if that family falls into one or more of seven protected classes of people.
Under the Fair Housing Act, sellers cannot discriminate against buyers based on an individuals’ race, color, religion, sex, disability, familial status or national origin. The Inman blog retells a story from the National Association of Realtors Annual Conference in October.
At the conference, Attorney John Goodman provided an example of how a buyer love letter can hurt a seller. In this case, the buyer is a member of a historically oppressed minority. This potential buyer makes a $145,000 offer on a home but the offer isn’t accepted, and the buyer doesn’t get the home. A few months later, the buyer finds out the home sold for $110,000 to someone who was “not” a member of a protected class.
It could appear that the higher $145,000 offer was rejected because of the buyer’s minority status — and that’s a violation of the Fair Housing Act. This scenario could turn into a lawsuit against the seller.
And, Goodman says if it does turn into a lawsuit, it would be really helpful to prove that the listing agent, broker, and seller knew nothing about the buyer, other than details of the offer, before making a decision. Goodman said quote: “Love letters change all of that.”
Inman writes that there’s a reason buyers and their agents use these letters. It’s because they are often successful at getting the attention of sellers, and when it comes to bidding wars, they can be crucial.
Attorney Goodman says he can’t recommend to buyers that they shouldn’t use them because they do help buyers get what they want, but he also feels that sellers shouldn’t see them.
So how do you manage that situation?
Goodman says that listing agents shouldn’t simply decide to keep the letters from their clients. Instead, he suggests that agents put into the listing agreement that letters will not be passed on to the seller. And if a current agreement doesn’t include that, he says agents can talk to sellers about “adding” that stipulation.
If the sellers insist on seeing the letters, Goodman says it might be good to get legal advice in your state. And he advises sellers to accept the highest and best offers along with any letters.
Goodman also says there’s another reason to reject the love letters. He says that many buyers aren’t telling the truth. Oh boy, I’ve learned that one the hard way for sure.
According to Inman, Goodman told another story at the conference about buyers who wrote a love letter extolling the virtues of the home and promising to maintain it as it had been for decades. But Goodman says within two months of buying the home, the buyers tore it down.
Now I wish I’d thought of this when I made an offer on a house in Walnut Creek that had a lot of land that would have been perfect for building our Real Wealth Network office. The house was full of mold and needed to be torn down. I made the mistake of low-balling my offer and telling her the house was being eaten by bugs so we’d have to tear it down and rebuild.
Instead of an acceptance, we got lots of banging on our office door the next day. The seller drove to our office after seeing our not-so-loving letter and screamed at us that she’d never sell us her house and how dare we say such a thing about her property. Lesson learned!
I suppose it’s better to offer highly effusive love letters when trying to get what you want. But please, only when it comes to real estate if you don’t really mean it!
Inman added that sellers often Google the buyers or look them up on Facebook. Goodman said you can’t prevent that sort of thing, and that it’s all a matter of risk management. I take that to mean — sellers, beware of those love letters, and maybe delete your Facebook history!