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The Pros and Cons of Homebuyer Love Letters

Richard Montgomery on

Dear Monty: What are the pros and cons of homebuyer love letters that many real estate agents suggest to homebuyers? We will soon be looking for a home, and we are in a market that remains overheated. People in our circle of influence have a variety of opinions about love letters. Do you have any ideas you can share?

Monty's Answer: Love letters, as they have become known, are not new. They have been around for decades. They are currently in vogue because of competition in many markets that suffer from low inventory and below-market interest rates. The below-market interest rates bring large numbers of potential homebuyers into the market. The low inventory causes home sellers to fear they will not find a suitable replacement. The perfect elixir for rising home prices.

Fair Housing and Privacy Regulation

Complaints from consumers over fair housing and privacy violations have captured the attention of both regulators and politicians. They called for more vigorous enforcement and penalties to discourage the practice. The National Association of Realtors has also taken notice. Many local NAR associations and MLS's have beefed up and modified their rules and regulations to educate their membership. They caution real estate agents to advise their homebuyer customers not to submit love letters or seek legal advice before they proceed. Here is a link on the subject from the NAR website.

The Exceptions

Some consumers will continue to write love letters. Some real estate agents will continue to encourage them. Many times, the cause will be a lack of knowledge. Another reason is with most legislation, the laws are complex and offer exemptions. For example, the fair housing law has several exclusions, one of which is a single-family home when no real estate broker is involved. Here is a link to the Fair Housing Handbook where you can learn more. Privacy law is handled state by state and varies widely. Here is a link that shares information where you can check out where your state stands.

The Pros and Cons of a Love Letter

With the background provided above, this writer takes no position on love letters. I can share what I have observed through my real estate experience.

 

Pros: Love letters are known to positively influence sellers in a negotiation, and it takes little effort to write one.

Cons: In a negotiation, love letters are known to turn off home sellers or just not be considered, and they could have unintended legal repercussions.

Additional Tidbits

Anecdotally, some sellers will ask for a love letter. In the distant past, writing or receiving a love letter was not as complicated as today. It would be wise to bring yourself up to date on the federal fair housing laws and any privacy laws that exist in your state. Photographs included in a home's promotion are one of the triggers for privacy law violations. Another trigger may be electronic listening or video devices of which the prospective buyer is unaware. Because homeowners not utilizing real estate brokers are exempt, real estate brokers appear to be the target of enforcement actions. When using the services of a broker, consider questioning the agent's love letter awareness.

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Richard Montgomery is the author of "House Money - An Insider's Secrets to Saving Thousands When You Buy or Sell a Home." He advocates industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty, or at DearMonty.com

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