Oregon’s ban on real estate love letters sparks free speech challenge

December 23, 2021 | By DANIEL ORTNER

Imagine you’ve decided to venture into the world of homeownership for the first time and find yourself locked in a tight bidding war—an all-too-common scenario in today’s overheated housing market. If only there were some way you could differentiate your offer and stand out for special consideration in the seller’s eyes….

It turns out there’s a way to do just that: Many potential buyers have turned to writing personal letters to sellers with stories about themselves and their families, and their dreams for how they plan to turn the home into a place where they can put down roots and build a future.

These so-called “real estate love letters” are a personal communication tactic that some buyers—often younger first-time homebuyers—are deploying to cut through the mix. In a highly competitive market, everyone’s looking for an edge, and if a sympathetic homeowner is persuaded by your story, they might be more inclined to accept your offer—even, in some cases, if you didn’t place the highest bid. In some cases, the seller may take the letter as a signal that the letter writer is serious about closing the transaction.

That probably sounds to most readers like a relatively harmless, and perhaps even charmingly old-fashioned, practice. But now real estate love letters are in the crosshairs of policymakers who would like to see them sent to the shredder.

Why? They fear that letters provided to sellers could reveal too much personal information that might lead to housing discrimination. In fact, Oregon has become the first state to formally target these communications, placing a gag order on real estate agents to prohibit them from sharing personal letters from buyers to sellers. The state, and some real estate trade groups, claim the letters may lead to discrimination and violations of the Fair Housing Act.

Keep in mind that no one has yet proved that actual discrimination is occurring as a result of these letters. As I told USA Today, “This is a solution in search of a problem. There is no evidence that it is a real problem that’s really resulting in discrimination. And you can’t just go and ban whole types of communication in the fear that some small portion of it might somehow be used by someone.”

But government seems to think that if they squint hard enough and look at it from just the right angle, they can imagine a scenario in which such discrimination just might possibly occur, and thus legislative action is desperately needed.

We’re poking fun, but just barely. And in all seriousness, once government entities start seeking to address problems for which there is no discernible evidence, we should all be concerned. Moreover, given that this is a relatively marginal practice, it’s highly unlikely that real estate love letters would have any statistically meaningful impact on the larger housing market.

But the supposed solution to ban love letters does create a serious problem, in constitutional terms, as it looks an awful lot like the government is placing a prior restraint on the buyers’ right to free speech as guaranteed under the First Amendment. Just because you’ve entered into a commercial transaction does not mean you waive your right to free speech—in fact, the ability to share relevant information, as determined by the parties in the transaction, is likely to benefit both sides.

Moreover, we’re talking here about private transactions between buyers and sellers. As it happens, sellers are not legally required to accept the highest bid, and if they prefer to accept less money for a property, they may have a good reason to do so. For example, perhaps they would prefer to sell to a buyer who plans to live in the home and contribute to the neighborhood and community, rather than convert the home to a rental property or flip it for quick cash. In that case, a personal communication from the buyer can provide the seller with helpful information to guide his or her decision-making.

Oregon’s love letter ban doesn’t go into effect until January, but the new law has already sparked a legal challenge. PLF is representing the Total Real Estate Group of Bend, Oregon, in challenging the state’s love letter ban in federal court. They believe the Oregon ban on real estate love letters is a form of unlawful government censorship, and they’re seeking to protect their clients’ ability to communicate freely with homeowners within the context of a private business transaction.

As a smaller firm, Total Real Estate Group also believes love letters help them serve their clients more effectively, making it possible for them to compete with bigger real estate brokers in the market. In fact, this might be why so many big real estate groups are supporting the ban.

“Guesswork is not adequate grounds for suppressing truthful speech,” Total Real Estate Group’s complaint to the court explains. “Nor can the Legislature broadly prohibit expression because a small portion of it might theoretically prompt some people to violate the law. State and federal law already prohibit discrimination in housing.”

Of course, no one disputes that housing inequities have a long history in the United States. But the harsh reality, as PLF’s own Jim Burling has shown in his writings here and elsewhere, is that housing discrimination has more frequently been a product of government policy, in forms like heavy-handed zoning laws, rent control, and restrictive land-use regulations, rather than stemming from private interactions among buyers and sellers.

Those facts suggest that policymakers who are truly concerned about discrimination in housing would do better to spend their time reforming abusive government policies—instead of obsessively sniffing out potential discrimination wherever they imagine it might possibly occur—and focus on developing workable solutions to address the shortage of available housing.