Fair Housing letters

An Ohio appeals court has ruled buyer agents need not provide racial data to client home buyers, even if the clients demand it. Both sides in the case used a 1996-97 exchange of letters between HUD and The Buyer’s Agent national franchise in Memphis to bolster their positions.
     Here are the letters that were used in the case:

Letter 1

U.S. Department of Housing and Urban Development
Office of the Assistant Secretary for Fair HousinG
Washington, D.C. 20410-2000

October 2, 1996

Jill D. Levine, Esq.
Legal Counsel The Buyer's Agent Inc.

Dear Ms. Levine:

Thank you for your April 10, 1995 letter to Roberta Achtenberg, former Assistant Secretary for Fair Housing and Equal Opportunity, concerning the prohibition against steering prospective homebuyers, on the basis of a protected class, as it applies to buyer's agents, under the Fair Housing Act ("Act") 42 U.S.C. Sections 3601-19. Specifically, you inquired as to the duties of a buyer's agent when a client instructs the agent to limit the scope of a search for properties by requesting to inspect, or exclude from inspection, dwellings in a neighborhood which the client identifies with reference to a classification based on a protected class status. While there is nothing in the Act to exclude the actions of a buyer's agent from the Act's coverage, the Department of Housing and Urban Development ("HUD") concludes that, with the various provisos discussed more fully below, a buyer's agent would not violate the Act merely by mutely accommodating the client's request to limit, on a protected class basis, the search for dwellings.

HUD's final rule implementing the Act broadly defines "broker" or "agent" to include "any person authorized to perform an action on behalf of another person regarding any matter related to the sale or rental of dwellings, including offers, solicitations or contracts and the administration of matters regarding such offers, solicitations or contracts or any residential real estate-related transactions." 24 C.F.R. Section 100.20 (1995) (definition of "broker" or "agent"). See also 24 C.F.R. Subtitle B, Ch.1, Subch. A, App. 1 at 934 (1995) (definition of "broker" or "agent"). Buyer's agents easily fit within this definition, e.g., they are authorized to perform actions on behalf of buyers regarding matters relating to the sale and rental of dwellings, such as making offers, etc. Accordingly, this definition includes brokers or agents, whether authorized to act on behalf of a seller or a buyer. See also Steptoe v. Beverly Area Planning Ass'n, 674 F. Supp. 1313, 1319-20 (N.D. 111. 1987) (Act covers persons or entities which "directly provide housing or those that are integrally involved in the sale or financing of real estate" provided that "the discriminatory action directly affects] the availability of housing.")

There are no administrative or judicial opinions respecting the Act of which we are aware in which a buyer's agent was a party or which specifically address the duties of buyer's agents under the Act. Without distinguishing between buyers' and sellers' agents, however, courts have interpreted subsection 804(a) of the Act, 42 U.S.C. Section 3604(a), to prohibit "real estate agents" from engaging in steering practices. See Dwivedi, 895 F.2d at 1529-30 (evidence that sellers' agents, without prompting from prospective buyers, showed white homeseekers dwellings primarily in white suburbs, while showing black homeseekers dwellings primarily in integrated suburbs established prima facie case of steering); and Zuch v. Ussey, 394 F. Supp. 1028, 1048 (E.D. Mich. 1975) (real estate agent violates subsection 804(a) of the Act when he or she "actively undertakes an effort to influence housing choice of a prospective home buyer on a racial basis"), affd, 547 F.2d 1168 (6th Cir. 1997). While those cases involved sellers' brokers and agents, given HUD's definition of the terms "broker" and "agent," HUD believes the teachings of those cases also apply to buyer's agents.

Consequently, HUD concludes that a buyer's agent would engage in steering in violation of subsection 804(a), when, without any stated preference or instruction from a buyer client, the agent took any action or made any statement that, based on, e.g., the protected class of residents of a particular neighborhood, renders, or tends to render, dwellings in that neighborhood unavailable to the prospective buyers. On the other hand, when prospective buyers, on their own initiative, explicitly inform their agent of a preference or a dispreference for particular neighborhoods with reference to a classification based on a protected class status, the agent would not make housing unavailable and, thus, would not violate subsection 804(a), merely by accommodating the clients' stated preference or dispreference. See Dwivedi, 895 F2d at 1530 ("[Act] does not place on individual brokers the duty to solve the collective-action problem that results when brokers serving (but not encouraging) the preferences of individual customers cumulatively affect the overall racial pattern in housing."). Such accommodation by the buyer's agent, however, is strictly limited to accommodating the client's self-initiated preference, and may not include any actions or statements that might encourage the client to have or to express such a preference. For example, if a buyer were on his/her own initiative to state to his/her agent a preference for living or not living in a neighborhood based on a protected class, the buyer's agent would violate the Act if, e.g., he/she openly voiced approval of the buyer's protected class preference/dispreference. Zuch, 394 F. Supp. At 1048. And an agent might well incur liability by inducing a buyer to state such a preference. For example, if a white buyer had not expressed a self-initiated preference for a particular neighborhood based on race and an agent said, "If you want to live in a predominately white neighborhood, you must ask me to show you dwellings in such neighborhoods only, because I cannot do that without your request," the agent would violate the Act. See id. At 1047 (real estate agent's language "intended to influence the choice of a prospective property buyer on a racial basis" violates Act). See also United States v. Robbins, 1974 P-H EOH Paragraph 13,655 at 14,264 (S.D. Fla. 1974).

Similarly, an agent's refusal, based on a client's protected class, e.g., race, to show the client homes in neighborhoods of a particular racial composition which the client specifies, would violate subsection 804(a) of the Act. For example, if a black couple were to tell their agent, "We want to live in a predominately white neighborhood," or "We will not buy a home unless it's in a predominately black neighborhood," the agent would make housing unavailable to the client in violation of subsection 804(a) of the Act were he/she to refuse to show them dwellings in the neighborhoods of the type the clients specified.

Your specific inquiry included a buyer's agent's duties under the Act when a client states that he/she is an Orthodox Jew, does not drive a car on the Sabbath, and would therefore like to live very close to a synagogue. By honoring the client's request by showing the client dwellings only in neighborhoods that met the client's description, the agent would not "make unavailable or deny" a dwelling to the prospective buyer on any protected class basis. Accordingly, the agent's accommodation of the client's request, e.g., by excluding from the housing search neighborhoods that do not satisfy the client's requirement of a nearby synagogue and by showing the client dwellings only in those which do, would not violate subsection 804(a) of the Act. If, on the other hand, the client had mentioned to the agent that he/she was an Orthodox Jew, but had not requested to be shown dwellings only in predominately Jewish neighborhoods, the agent would violate subsection 804(a) by, on his/her own accord, showing the client dwellings only in predominately Jewish neighborhoods, thus making dwellings in other neighborhoods unavailable to the client.

You also inquired specifically as to a buyer's agent's duties under the Act when the prospective buyer says to the agent, "I would like to live in an Asian neighborhood." As in the preceding example, the agent, in honoring the client's request by eliminating from the search all non-Asian neighborhoods and by showing the client dwellings only in those which meet the client's requirement, would not "make unavailable or deny" a dwelling on any basis and, therefore, would not violate subsection 804(a) of the Act. In other words, if a white buyer said to his/her agent, "I want to live in a white neighborhood," or "Don't show me any houses where a lot of minorities live," the agent would not violate the Act if he/she acted upon his/her client's instruction. On the other hand, the agent would violate the Act if he/she said, "I don't blame you for wanting to live in a white neighborhood," "I would never do that [i.e., show a white homebuyer houses where a lot of minorities live]," or something similar that indicated the agent shared or encouraged the buyer's preference/dispreference.

In sum, the Act does not interfere with an agent's delivery of services, as long as agents themselves do not indicate their own discriminatory preferences/dispreferences or, without instructions from their clients, limit the scope of the search, or otherwise make dwellings unavailable to them. In merely obeying a client's request to limit the scope of the search based on protected class status, however, the agent would not make housing unavailable to the client and, thus, would not violate the Act.

I hope the information provided is helpful.

Elizabeth K. Julian Assistant Secretary


Here is HUD’s second letter to The Buyer’s Agent

Letter 2

Jill D. Levine, Esq.
Legal Counsel
The Buyer's Agent Inc.

Dear Ms. Levine:

This is in response to your letter of October 28, 1996 thanking me for my reply to your earlier letter. To prevent misunderstanding of HUD's position on your issues, I'd like to take this opportunity to make clear what the letter did and did not say.

The reply to your letter was an attempt to answer your narrowly articulated questions in a helpful and accurate manner. However, it is important you understand the answers to the hypothetical situations you posed reflect an interpretation of the law as it applies only in those specific circumstances. The letter does not represent HUD policy or guidance on the general issues.

The answer to your specific questions regarding the legal import of the accommodation of buyer stated preferences was given after extensive examination of the issue by the Office of General Counsel and the Office of Fair Housing and Equal Opportunity. While under a strict 804(a) (Fair Housing Act) analysis such accommodation may, under a limited set of facts, not violate that provision of the Act, I do not endorse that sort of accommodation as good

policy, nor as keeping within the spirit of the Fair Housing Act.

You express concern that the "exclusive buyer agent who wants to practice real estate ethically and legally" has been hampered by laws that have been designed and interpreted from the viewpoint that the real estate agent always represents the seller. Please understand that I think the ethical obligations are the same, and I do not believe that accommodating a buyer who indicates preference for housing on a racial basis constitutes ethical conduct.

In fact, the National Association of Realtors, in a training manual recommends "that a buyer's agent include language in his or her buyer's representation agreement indicating a commitment to equal housing opportunity and a statement that the agent has no duty to disclose information regarding race or other protected classes."

Based on these concerns, as well as responses from the real estate industry, fair housing advocates, and other concerned parties, I have asked legal counsel to further consider the implications of such an accommodation

from the standpoint of 804(b) and (c) of the Fair Housing Act. Further, I have referred your letter and HUD's response to the Department of Justice, Civil Rights Division, for review.

I want to emphasize that there is nothing in the Fair Housing Act that requires an agent to accommodate an expressed desire to limit housing search based on race. Therefore, doing so reflects a conscious decision by the broker. The proof that an individual buyer, without encouragement or solicitation, insisted on such a limitation as a condition of the agent receiving the buyer's business would be fact intensive and require extensive investigation involving not only the agent but the buyer. Moreover, the investigation would necessarily require inquiry into the agent's practices (in

what manner do they maintain and make available location records based on race as part of their service?) and any independent judgments that the agent might have made in accommodating the request (what racial composition caused a particular neighborhood [to be] determined to be appropriate for inclusion/exclusion from the search?).

In short, from the standpoint of legally prudent, as well as ethical, considerations, I would strongly advise against any agent or broker putting themselves in that position by accommodating a request that a housing search be limited based on race, or other protected-class terms. The fact that Section 804(a) of the Fair Housing Act may, under limited

circumstances, not prohibit such accommodation does not make it right, does not make it ethical, and it is not the policy of the Department of Housing and Urban Development to endorse such conduct.

Finally, I would point out that your hypothetical questions focused on an individual act of a buyer and a broker's response. It did not assume any action on the part of the real estate broker, agency, or other entity to solicit or encourage buyers to express locational preferences in racial terms. I mention that because of your statement that "The Buyer’s Agent and The Buyer's Broker Institute train hundreds of exclusive buyer brokers each year." To the extent that you intend to use my earlier letter to help them conduct their professional duties in a legal and ethical manner, you should also share this letter with them.

Thank you for your interest in fair housing and equal opportunity.

Elizabeth K. Julian, Assistant Secretary


Here is a third letter, this one written to a Fair Housing advocate in which the first letter is rescinded. (HUD never impaneled a group to develop the guidance.)

Letter 3

U.S. Department of Housing and Urban Development
Office of the Assistant Secretary for Fair Housing
Washington, D.C. 20410-2000

December 3, 1996

Ms. Aurie Pennick
Leadership Council for Metropolitan Open Communities

Dear Aurie:

Thank you for your letter concerning the "buyer's agent" issue. Of course, I share your concern that real estate agents who accommodate a buyer's direction to limit a search for housing on the basis of race are not acting in the spirit of the Fair Housing Act, and I agree that the Act, taken in its entirety, ought to prohibit such conduct. My conversations with numerous real estate professionals over the past month indicate they do not intend to alter their position that it is both legally prudent and ethically responsible to refuse to accommodate a buyer's request to conduct a housing search based on race, a position which I, of course, support. They have also expressed a desire to make clear that such conduct is prohibited by the Fair Housing Act.

However, I take your criticisms to heart about the message that the letter sent. While my second letter

was an attempt to address my own concerns in that regard, I have determined that this issue cannot be effectively addressed by responding piecemeal to hypothetical inquiries. In light of the obvious "slippery slope" down which my letter has apparently invited some to slide, and my agreement with you that my letter sent the "wrong message," I have decided to rescind the Oct. 2 letter, as you requested, and develop comprehensive guidance that will address the issue more broadly, with specific attention to Section 805 of the Fair Housing Act which speaks more directly to the responsibility of real estate professionals engaging in residential real estate-related transactions.

I truly regret that my earlier letter, which tried to limit the application of the legal conclusion reached, has been interpreted to do so much harm, and it is my intention to rectify that as much as legally possible. I appreciate your comments, as always.

Elizabeth K. Julian, Assistant Secretary

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