What is Steering in Real Estate? Definition, Examples, and How to Avoid Fair Housing Violations

Steering in real estate is one of the ethical topics that pop up during a real estate agent’s career. Whether it’s understanding the topic to pass the state exam or identifying it being practiced in the world, knowing what steering is will help a better, more ethical conscious real estate agent.

So, let’s explore what steering is and how it affects the industry.

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What is Steering?

In the real estate world, “steering” is when an agent or broker tries to guide a buyer (or renter) to or away from a particular area or neighborhood based on a protected characteristic. This practice is discriminatory and is an infringement of rights. The reason why is because discrimination is illegal and unethical.

Under the federal Fair Housing Act, protected characteristics include: race, color, national origin, religion, sex, familial status, and disability.

The Fair Housing Act

This form of discrimination was prevalent in the 1960s when we were living in a world that was largely segregated. That changed and we enacted the Civil Rights Act in 1968 which included the Fair Housing Act.

The Fair Housing Act made it illegal to discriminate in housing-related activities (including the sale, rental, financing, and brokerage services) based on protected characteristics.

Over time, the law expanded:

• In 1974, the Fair Housing Act was amended to include sex as a protected category.
• In 1988, the Fair Housing Amendments Act expanded protections to include familial status and disability.

Important note: Some states add additional protected classes (for example, age in certain contexts), but age is not one of the federal Fair Housing Act’s core protected classes.

These fair housing laws helped reduce discriminatory practices in real estate, but steering and redlining-type discrimination still occur today, which is why fair housing enforcement continues.

Redlining is a discriminatory practice where mortgage lenders refuse to give loans or extend credit to borrowers in certain areas of town (often based on the racial or ethnic makeup of those neighborhoods).

Examples of Steering

Believe it or not, real estate steering still occurs today although sometimes it’s purely unintentional. Imagine you have a Latin family as your client. You think they will be more comfortable in a Latin community so you plan to show them houses in that area. You don’t mean any harm but you’re actually steering which is illegal and unethical.

Because you were only showing your clients houses in Latin communities, this is an example of steering them toward an area or neighborhood.

Let’s say your client asks for a great school district on the west side. There happens to be two but one is in an area that is predominantly Asian and your client is white. You make an assumption that your client will not consider the Asian district so you don’t present it to them.

This is an example of steering them away from an area. You can avoid steering in this situation by presenting both districts to your client and letting them decide for themselves.

How to Avoid Steering

As a real estate agent, how can you make sure that you’re not breaking the law and genuinely servicing your client? To overcome this, agents must first become aware of this form of discrimination and understand how they can avoid it while working with the homebuyer. There are some simple and basic things that you can do to achieve this.

HAVE GOOD COMMUNICATION

It all starts with having good communication with your client. Start with listening, which will lead to understanding. When speaking, be clear and concise. To ensure you are hearing someone correctly, summarize what you have heard in response. Practicing all of these skills will make sure you’re always on the same page as your client.

ASK SPECIFIC QUESTIONS

Ask questions that are specific when it comes to where they want to live. If your client says they want to live on the “west side,” ask for a particular street or a district they might be familiar with to narrow it down. Asking specific questions will help you create parameters. This way you can zero in on where they really want to live and help you avoid steering.

MAKE IT ABOUT THE PROPERTY

You won’t get into trouble with steering when you present all home opportunities to your client. Focus on finding the properties based on the criteria set by your buyer. Don’t make assumptions on whether your client will want to see a property in a particular area. Simply present all the properties in every area, district, and neighborhood and let your client decide where it’s most appealing to live.

If a client asks questions that could lead to steering (for example, neighborhood demographics, “who lives there,” etc.), a safer approach is to keep the conversation focused on their property criteria and encourage them to use objective third-party resources for neighborhood research.

Final Thoughts

Remember, it’s up to your client to make the choice of where they do or don’t want to live. Stay out of trouble and don’t make the choice for them! The only steering you should focus on is steering yourself away from discrimination.