In the fourth study of its kind, The Department of Housing and Urban Development and the Urban Institute has discovered that discrimination is changing form. The days of blatant discrimination by real estate and leasing agents against their clients are waning, but a more subtle form is appearing, the study reveals.
The study was conducted in 28 metropolitan areas throughout the country, used 8,000 testers and cost $9M to complete. The study used a “pair-testing” approach first utilized in 1977 by HUD to obtain the findings. In this approach, two testers – one Caucasian and one Asian, African-American or Hispanic – would approach the same agency and inquire about the same house for sale or unit for rent. Each pair would give identical descriptions of their age, financial situation, gender and familial status. The tester would then see if the houses they were shown would differ based on the ethnic make-up of the tester.
Compared to their Caucasian counterpart, African-American testers were told about 17% fewer units for sale, and Asians were told about 15% fewer units for sale. These findings also held true when the testers inquired about units for rent. Hispanics testers were shown a similar number of units as the Caucasian tester without a statistically significant difference.
This study highlights one of the biggest risks to real estate firms today, discrimination claims continue to be one of the leading causes of lawsuits against real estate professionals. While overt discrimination may be on the decline, many claims have risen from subtle instances such as agents locking car doors in some neighborhoods and not others, assuming certain clients would only want to live in certain areas, or not showing certain homes to buyers who do not fit that street’s current composition.
A real estate firm can take a number of practical steps to prevent this type of discrimination.
(1) Spend extra time with each client — Rather than deluge each client with hundred of potential homes to avoid discrimination, it may be better to spend a few extra minutes discussing your client’s desires with them. Find out exact areas they want to live in, or more specifics on the house they are looking for. This will allow a firm to not only treat each client equally, but may also provide a higher quality of homes to the applicant.
(2) Remove assumptions about what a client wants — A real estate agent may be trying to help in narrowing a client’s search by removing certain geographic areas, styles of homes or price ranges. In reality, this could be construed as discrimination. Only the client should have the right to remove certain cities or neighborhoods or characteristics from the list. An agent should instead bring these attributes to the attention of the client and let them decide if they would like to remove them or not.
(3) Detach Client Name from Housing Search – While not feasible in each situation, assigning a number rather than a name to a file may prevent misconceptions or prejudices from clouding a house search. When it comes time to search for a home, the agent or agent’s assistant will only that the client’s desired housing characteristics to consider – not the client’s gender, race, age, familial status or disabilities.
Avoiding professional liability lawsuits takes care, effort and attention. Contact BrokerLiability.com to discuss more ways to prevent lawsuits and how to correctly structure your insurance program to protect your firm when they do come.