What Should Real Estate Agents And Consumers Know About Prizes, Gifts And “Love Letters”

Thursday, July 15, 2021 | 11:00am

In Tennessee’s hot real estate market, many potential homebuyers and buyers’ agents are going above and beyond making financial offers in order to separate themselves from the pack and attract the attention of sellers.

Concert tickets, homemade cookies, tacos, gift cards, fuel cards and personal letters are just a few of the “sweeteners” that buyers and buyers’ agents are using in order to help close the deal.

While Tennessee’s healthy real estate market is a sign of the Volunteer State’s robust economy, the Tennessee Department of Commerce & Insurance and the Tennessee Real Estate Commission remind homebuyers and licensed real estate professionals to always be mindful of the rules and statutes governing inducements, cash rebates and other prizes.

You’re probably asking yourself, “Are gifts, prizes or other items that are intended to lead to a real estate listing or sale involving a licensee a violation of Tennessee’s real-estate laws?”

The short answer is no, not under certain conditions.

In Tennessee, a real estate licensee may offer a gift, prize or other valuable consideration as an inducement to a purchase, listing or lease of real estate only if the offer is made:

  1. Under the sponsorship and with the approval of the firm with whom the licensee is affiliated; and
  2. In writing, signed by the licensee, with disclosure of all pertinent details, including but not limited to:
    1. Accurate specifications of the gift, prize or other valuable consideration offered;
    2. Fair market value;
    3. The time and place of delivery; and
    4. Any requirements which must be satisfied by the prospective purchaser or lessor.

The entirety of the statute (Tenn. Comp. R. & Regs. 1260-02-.33) can be viewed here.

What’s potentially more problematic are “love letters” -- that is, the personal letters written by potential homebuyers to home sellers in order to differentiate themselves from other buyers.

Instead of giving gifts, potential homebuyers frequently write and leave personal letters to homeowners in order to introduce themselves, their families and possibly rave about the home in order to convince the seller that they will be a good fit for the home.

While these so-called “love letters” are not illegal or a violation of state laws per se, the letters are viewed by many professionals as potentially risky. Why? The letters could potentially open the door to discriminatory practices and possible accusations of Fair Housing Act violations. The Fair Housing Act prohibits discrimination because of race, color, national origin, religion, sex, familial status and disability.

To help inform licensed professionals and consumers, the National Association of Realtors has weighed in on “love letters” in order to make members aware of potential Fair Housing Act violations

As Tennessee's housing market continues to boom, we remind licensed real estate professionals and consumers to always remember that the Tennessee Real Estate Commission and our staff are here to answer questions, provide information and address concerns.

For additional consumer tips and other information please visit our website at www.tn.gov/commerce/regboards/trec. For other questions or concerns please reach out to us at trec.info@tn.gov or (615) 741-2273.

Caitlin Maxwell serves as the Executive Director of the Tennessee Real Estate Commission at the Tennessee Department of Commerce and Insurance