Today's real estate market has been extremely challenging for prospective buyers to navigate. Not only have home prices soared on a national level, but low inventory has upped the competition as buyers clamor for available properties to take advantage of today's low mortgage rates.
In fact, bidding wars have been popping up for properties across a wide range of price points, and buyers are doing whatever they can to give themselves an advantage. For some, that means coming in with mortgage preapproval. For others, it means making all-cash offers, or coming in with offers well above asking price. But for buyers who are on more of a budget, using their words could be their ticket to getting an offer accepted.
It's not uncommon for potential buyers to submit a plea letter, or love letter, when trying to get an offer accepted on a home. The point of these letters is to appeal to a seller beyond just money. For example, a buyer might use a plea letter to discuss how he can see his family growing up in that seller's home. If the seller is so moved, that buyer's offer may win out over another at a comparable price point.
But one state has decided to ban real estate plea letters. And if more follow suit, it could change the housing market as a whole.
No more plea letters in Oregon
Oregon home buyers will no longer get the option to submit love letters to sellers in conjunction with a real estate offer. The reason? Sometimes, plea letters can reveal personal information that could potentially lead to discrimination based on factors like gender, religion, race, or sexual orientation, something lawmakers want to discourage. As such, they're banning plea letters to take all that information off the table and force sellers to accept or reject offers on the basis of financial data alone.
Of course, it's easy to make the argument that banning plea letters puts buyers with more limited financial resources at a disadvantage. If they can't keep outbidding the competition, taking away the option to sway sellers with words could be detrimental. On the other hand, there's already enough of a history of discrimination in the housing market (think redlining and unfair lending practices) that taking away the option for sellers to do so individually also makes sense.
Will more states ban plea letters?
So far, Oregon is the first state to take plea letters off the table, and it's too soon to know if more will follow. But if the practice becomes more widespread, it could potentially lead to a more equitable housing market.
Or will it?
Banning plea letters could give real estate investors an unfair advantage over regular buyers. It's not uncommon for an investor and a regular buyer to duke it out over the same home, with the investor looking to use it as an income property and the regular buyer wanting to live in it. But investors tend to have more access to capital, so if regular buyers lose the option to appeal to sellers in writing, it could limit their choices in an already tight market. As such, Oregon's decision could actually backfire and hurt the average buyer, all the while giving investors even more of an edge.