Is it Housing Discrimination if the Buyer Does Not Meet All of the Seller’s Terms?

Not When There Was a Financing Change Which Made the Offer Not Consistent with the Listing Terms

Pamela McDonald, an African-American, wanted to buy a house in the Shasta-Redding, California area.  Her real estate agent, who was also African-American, telephoned First Shasta Real Estate, a Coldwell Banker franchisee, and spoke with a Caucasian representative, about houses for McDonald to view.  The agent prepared a pre-approval letter indicating that McDonald qualified for a loan of up to $180,000.

Coleman and her agent described the Coldwell Banker representative’s attitude after he saw them as unenthusiastic. He showed McDonald a number of listings her agent had selected, including 2075 Galaxy Way, but then suggested that McDonald look at homes “less upscale” that were more “suitable” for McDonald.

McDonald wanted to make an offer on 2075 Galaxy Way that was higher than the asking price, but included a seller carry-back.  The Coldwell Banker representative discouraged her from making the offer after consulting with the seller’s agent allegedly because of the unusual carry-back financing.  Nevertheless, Coleman faxed the offer herself to the seller’s agent, who did not respond. The seller (also Caucasian) thereafter sold the property to another buyer (another Caucasian) for a lesser amount but with no carry-back financing.

McDonald sued Coldwell Banker and various other parties in U.S. District Court (N.D. Calif.), asserting discrimination claims under California’s Fair Employment and Housing Act (FEHA) and the federal Fair Housing Act (FHA). The District Court granted summary judgment in favor of the defendants and McDonald appealed.

The Court of Appeals started its analysis by reviewing the requirements for a prima facie case under the FEHA, which, as the Court pointed noted, are identical to the requirements under the FHA. The plaintiff must show membership in a protect class, application and qualification for housing, denial of housing, and that non-protected similarly situated individuals did obtain housing.

The Court focused on the carry-back financing in McDonald’s offer. It explained that the provision did not meet the seller’s listed terms, and therefore McDonald did not demonstrate “qualification” within the meaning of the statute. It also said that the carry-back distinguished McDonald from the eventual purchaser such that they were not similarly situated.

The FEHA and FHA also allow a plaintiff to establish by circumstantial evidence discriminatory motive in refusing the housing accommodation. The Court found no evidence that the defendants took any action to secure the sale of the house to a person who was of a different race than McDonald. It found no evidence that the agents ever disparaged McDonald or treated her differently based on their race. Summary judgment for the defendants was affirmed.

Although the plaintiff was not successful here, this case provides an important reminder that every applicant should be treated the same and that management agents should refrain from commenting on specific choices made by applicants or buyers. Even if those comments may seem benign, an applicant may be offended by those remarks as was the situation in this matter.

Just A Thought.

Article by Karin Corbett