Study Illustrates R.E. Agents’ Discrimination in Steering Prospective Home Buyers

Worried about getting discriminated against when looking for a Florida home loan or a home in a particular area? A new study shows why such concerns may be valid.

If you ask a real estate agent whether minorities are treated differently than whites during the home buying process, you’ll most likely receive an adamant denial. But, a new study funded in part by the federal government suggests that discriminatory practices are routine for some agents. As reported by columnist Kenneth Harney, the 2003-2005 study was conducted in 12 metropolitan areas using teams of “paired testers” — individuals or couples posing as home seekers — to compare how random agents treat African-Americans, Latinos and whites.

The 73 firms tested were located across the nation from New York, Chicago, and San Antonio to smaller markets such as Dayton, Oh., Mobile, Ala., and Pittsburgh, Pa. The nonprofit National Fair Housing Alliance conducted all the tests with financial support from the Department of Housing and Urban Development. The methodology was simple — sending testers of different racial backgrounds to the same firms looking to buy a home in the area. Each firm was visited by whites and then by either African-American or Latino applicants.

The study did not identify the firms involved, but the alliance has filed suits against a handful of them in federal court.

The reason? The African American and Latino testers were given financial qualifications that were slightly superior to those of white testers. They had more income, better credit, larger down payments, and longer employment tenures than the white testers. Yet white shoppers were routinely steered away from racially mixed neighborhoods, even when they expressed interest in houses in those areas. The minority testers were often steered away from more affluent and mostly white neighborhoods, even when they wanted to see real estate there.

The rate of steering, according to the study, was 87 percent. The tests also documented the following findings:

– Serious differences in service given to whites compared with minorities. Nearly 20 percent of the time, African-American and Latino testers were refused appointments or offered very limited services. White shoppers were shown a total of 1,144 houses —- nearly eight properties per person -— while paired minority shoppers were shown 732 homes, or about five per person.

For instance, in Marietta, Ga., a suburb of Atlanta, a white tester asked to see a home in Stone Mountain, a predominantly African-American community. The white home buyer was told by the agent that she would not want to live in Stone Mountain, and the tester was shown eight homes in predominantly white communities instead, according to the report. By contrast, an African-American tester who visited the same realty office was urged to consider Stone Mountain, and the agent drove the tester to Stone Mountain, pointing out for sale signs.

– Minorities were more frequently required to provide a lender’s pre-approval letter or other financial data before agents would show them houses.

– Real estate agents more frequently offered whites financial incentives, such as reduced closing costs or lower home loan rates.

– School district quality was often used as a proxy for the racial/ethnic composition of an area. Instead of making blatant comments about the racial composition, many real estate agents told whites to avoid certain areas because of the schools, according to the story.

– Some agents admitted to white testers that they knew they weren’t supposed to recommend houses based on the racial composition of schools but did so anyway. One reportedly asked the tester not to “tell anyone I said that.”

What’s the significance of the new study?

“We are not looking to extrapolate [the results] to the entire real estate industry, but instead to study specific companies and document problems,” said Shanna L. Smith, president of the National Fair Housing Alliance, who believes the research was “enforcement-based” rather than scientific.

Smith’s group already has filed suits against several offices based on evidence developed in the study. Steve Cook, a spokesman for the National Association of Realtors, said that there is still work to be done in fair housing, and noted that the association actively offers training programs to agents and member companies across the country. Be sure, if you are in the market for a Florida home loan, that you are aware of your rights, and that you choose the right professionals to work alongside you.