Redfin must revamp its business – including eliminating a minimum home price for service – in order to serve more non-white homebuyers. That was but one prong of a multifaceted agreement that Redfin and 10 different fair housing advocacy groups filed at a Seattle federal courthouse Friday.
The deal probably ends a lawsuit that the National Fair Housing Alliance and like-minded groups filed 18 months ago accusing the brokerage and popular real estate listings website of offering services in predominantly white neighborhoods at a “substantially greater rate than it does in communities of color.” Redfin’s practices, the plaintiff’s said, “perpetuate the stark patterns of housing segregation that plagues our nation.”
Redfin did not admit it violated the Fair Housing Act or any other law, rather stating it “entered into this settlement agreement for the purpose of avoiding the burden and expense of protracted litigation.” Redfin did agree to give plaintiff’s $4 million as part of the deal. (A federal judge, James Robart, must formally approve the pact.)
Time will tell whether the settlement meets its mission to serve more minority homebuyers – or perhaps puts Redfin at a disadvantage compared to brokerages who have not faced the crosshairs of a Fair Housing Act lawsuit.
The settlement does let Redfin “continue the general practice of using price to decide whether to serve a customer,” a Redfin spokesperson said.
The company added that it is committed to fulfilling the Fair Housing groups’ goals – even if it hurts Redfin’s bottom line.
This white paper explores the benefits of closing the homeownership gap, systemic mortgage industry issues, and how Salesforce is partnering with Rocket Mortgage to enable mortgage as a service and increase minority and first-time homeownership.
Presented by: Salesforce
“Our commitment to broadening the price range of the homes we can sell is why, every year, by design, we lose money selling low-priced homes,” the spokesperson said. “As part of the settlement, we will increase our investment in serving buyers interested in low-priced homes in communities that have historically been underserved by the real estate industry.”
Many brokerages, particularly those who focus upon a more high-end clientele, can end up serving predominantly white neighborhoods. But Redfin’s model of employing agents arguably made it vulnerable to a Fair Housing Act allegation. That’s because the company could potentially be held liable when Redfin managers direct employee agents to set price thresholds for what clients to serve.
Under the agreement, Redfin must “eliminate the use of a minimum home price for which it will not offer” either the service of a Redfin employee agent, or partner agents who take leads from Redfin in exchange for a referral kickback if a deal is done.
While the minimum price is eliminated, Redfin may generally direct its employee agents to consider pricing thresholds when determining which sales lead to pursue.
But, in order to let home pricing play a role in leads to focus upon, Redfin must establish “a monitoring and alert system” that ensures price thresholds in white-majority service regions are not less than thresholds in which a majority of the population is non-white.
Asked about this monitoring and alert system, a Redfin spokesperson said that the company did not have past problems with lower pricing thresholds for predominantly white areas. “When we analyzed our service in 2021, we found that with price being equal, Redfin employees are more likely to serve neighborhoods of color than extremely white neighborhoods,” the spokesperson said.
Also, as part of the settlement, Redfin agreed to “recruit and hire to increase racial diversity within employee agents, associate agents, and partner agents.”
This recruitment strategy necessitates working with the National Association of Real Estate Brokers, which historically represents Black real estate agents as well as the National Association of Hispanic Real Estate Professionals and the Asian Real Estate Association of America.
Another settlement plank is an “advertising plan that promotes Redfin’s services to prospective sellers and buyers of homes in non-white communities.
Redfin is to also “hire a senior executive to serve as Fair Housing Compliance Officer” to “serve as a point of contact for settlement implementation.”
Indeed, much of the settlement hammers out benchmarks to ensure that Redfin is in continual contact with the National Fair Housing Alliance and allied groups. This includes accepting the group’s ideas for employee agent training content unless Redfin “has a good faith reason to not accept.”
The National Fair Housing Alliance did not respond by Friday afternoon to questions about the lawsuit. The group did provide a joint statement with Redfin, which reads in part that the settlement agreement “reflects the parties’ joint commitment to the fair housing goals outlined in the agreement.”
“The parties recognize that these changes advance their commitment to equitable real estate services,” the statement continues, “And that much work needs to be done in the industry to eradicate the historical impact of systemic racism on people and communities of color.”