“We hold these truths to be self-evident that all men are created equal.” We all know this phrase and we know it very well. Being created equal is one thing and being treated equal is an entirely different matter. And that’s what the fair housing act is all about. No matter how much we try to avoid discrimination, yet it happens and is found all around us. The general principle of the fair housing act is that it is unlawful for any person to be discriminated against upon the purchase or renting of a real estate property based on his/he membership in a protected class. There are 7 indicators based on which it is forbidden to discriminate against a person stipulated by the Federal Fair Housing Act which include:
- Familial status
- Disability status
There are a lot of states that have passed their own laws in regards to discrimination in real estate. Real estate investors need to take into consideration their specific state regulations in terms of this act as well in addition to the overall federal law because one state may be significantly different from the neighboring one. For example, California prohibits discrimination against age, medical condition, and even source of income. This is a very sensitive topic and real estate investors need to be extra careful and familiarize themselves with the act so as not to fall into an action that is deemed unlawful. So do your research! Violations and government efforts to enforce the law still continue on daily basis. So the question is how and what real estate investors can do to make sure they don’t violate this anti-discrimination legislation?
Related: The Best California Real Estate Markets: Affordable and Not So Affordable Areas
Following is some practical advice on how to work in your real estate investing business without violating anyone’s rights:
#1. What kind of questions should you ask your buyers/tenants?
You can always ask questions to help you learn objective, non-discriminatory information such as:
- What price range can your prospective tenants afford?
- What features are they looking for in a residence?
- Where do they want to live?
Provide your buyers/tenants with resources that answer their own questions beforehand such as the quality of schools around, the availability of local amenities, and the crime rate in the area. When the client has all the answers right in front him/her, you won’t have to put yourself in the position of answering a question whose answer might be understood incorrectly. Investors tend to violate the act unintentionally, so by having resources ready for your buyer or tenant with all the needed information can save you a lot of time, effort, and complications.
Related: Becoming a Landlord: 5 Guidelines to Being Fair to Tenants
Most of the time prospective tenants ask real estate investors: “Who lives here?” This can be a very overwhelming question because no matter how hard you try to answer it wisely, your answer might always in some way sound discriminating. So let your clients know that you cannot provide them with information on the racial, ethnic, or other protected class characteristics under the fair housing laws, which prohibit discrimination based on such factors. That is why it is recommended to provide your clients with a written statement about the services and information you can give them.
#2. How to answer your buyers/tenants questions without violating the act?
Let’s take a look at some examples of commonly asked questions among buyers which put you at risk of violating the fair housing act:
1. Where are the Mexican areas in town?
This question is mostly asked by buyers in Eastern Washington. As an investor, you want to always stay away from characterizing residential districts based on ethnicity. You can give your buyers contact information for local neighborhood associations and let them do their own homework.
2. Why is this house selling for $300,000 and the house down the block for $200,000? Is it because of the people around?
The respective question from a tenant would be: “Why is this house renting for $2,000 and the house down the block for $1,200?” It is important to understand that buyers as well as tenants are always comparing home prices or rents. If encountered with such a question, let your client know that listings for home prices are determined by numerous variables such as size, number of bedrooms and bathrooms, age, current state, interior amenities, and many others.
3. Can you just show us homes in white neighborhoods?
This may sound shocking, but a lot of buyers and tenats come in asking this very question! Tell your client that you support fair housing laws and don’t categorize your properties based on the race of the neighbors. Explain to them that you can find them a house based on objective real estate factors such as the price range, the type of property, the size, etc.
#3. How to sell your property without violating the fair housing act?
It is a well known fact that every real estate investor when willing to sell or rent out his/her property searches for the most “qualified” buyer. However, you want to always be cautious when it comes to classifying who’s qualified and who’s not. Common mistakes investors make are:
- Denying a rental application because of having a “bad” feeling about a buyer/tenant. That’s totally not OK! Stick to your objective factors such as income level and recommendations from previous landlords when choosing a tenant.
- Telling tenant they can’t have a service animal because you don’t accept pets. This is wrong because a service animal is NOT a pet. You are required by law to allow service animals, regardless of what they are.
Related: Buying and Selling An Investment Property: Do’s and Don’ts
Putting any form of restrictions on buyers or tenants will lead to violating the fair housing act, so try to avoid falling into such traps. As a real estate investor and/or a landlord, you have the responsibility to familiarize yourself with the law and abide by it, which means not discriminating against anyone on the basis of skin color, race, disability, or any other condition. Based on the fair housing principles, you cannot establish any discriminatory requirements by deny that housing to someone with any objective reason or advertising your property to only a certain race or a specific group of people. In the end, in real estate investing we should all aim for equality among all.