Last Updated on February 25, 2024 by Ali Hamza
Steering In Real Estate
Steering is the illegal practice of influencing a person’s real estate choices, usually toward properties that offer the broker an unusually large commission. For example, if you were looking for an apartment to rent in Chicago and found two options, both with similar qualities (such as location, size, amenities), steering would be when your real estate agent directs you towards one of those apartments because they make more money off it.
It’s important to note that this isn’t the only way real estate agents earn their money, they also earn commissions from leasing or selling properties. Steering can happen either before someone begins searching for homes or after they’ve already begun narrowing down their choices. There are different situations where brokers may buyers into certain properties:
- Where the broker knows an offer already exists on the property.
- Where brokers know there are properties that are under contract that will not close.
- Where the house has been pending sale for a long time and now ready to be sold, but brokers don’t want to show it because they can’t make as much money of it.
What is meant by steering?
Steering term is used for promoting the choice of buyer. The practice of steering is the influence of protected characteristics on the community’s choice in a property sale. These characteristics are racial or ethnic origin, color, religion, gender, disability, gender identity, family status, and national origin.
Paid more when selling
The main reason realtors do this is because they get paid more when selling or leasing higher-end homes; these homes typically appeal to wealthier clients who tend to spend more on commission fees. They also get paid more if they sell multiple properties (such as in “bulk sales” like apartment buildings), and their fee is a percentage of the total price of the home, so steering people towards buying more expensive homes mean they make more money. There are no federal laws that outlaw the practice of steering, even though it may be considered “unethical.” There are some states (such as California), however, that have laws against this practice.
Real estate agents
The majority of people who fall victim to steering never realize what happened, since brokers aren’t required to disclose their personal financial gains during the sale of a home. Some states do have requirements for real estate agents to disclose any potential conflicts of interest before taking on clients, but most do not require them to reveal how much commission they stand to gain from selling each property.
One way you can avoid
One way you can avoid being steered is by signing an agreement with your broker stating that if they help you find a home within your price range, they will be paid regardless of which property you ultimately purchase. This option isn’t offered to every client, but it’s definitely worth asking for if you feel like your broker is steering you towards one particular type of housing.
If you feel like your real estate agent is steering you toward higher-end properties, tell them which type of housing is best suited for your needs and price range. You may also want to ask why one property costs significantly more than another similar place that’s located nearby. If their explanation doesn’t satisfy you, it could be a sign that they’re trying to steer you towards a more expensive property.
Signing an agreement
Another way to avoid being steered is by signing an agreement with your broker that states they will be paid regardless of which property you ultimately purchase. This option isn’t offered to every client, but it’s definitely worth asking for if you feel like your broker is steering you towards one particular type of housing. Real estate agents make most of their money from commissions, but steering usually only makes up a small percentage of those earnings since it doesn’t happen very often.
Some realtors don’t intend to steer buyers into certain properties:
Sometimes the reason why one place costs more is because it has better qualities or amenities than another similar home does. A good way to tell whether someone’s trying to steer you is to ask them why one property costs significantly more than another similar place that’s located nearby. If they can’t give a good explanation, it could be a sign that they’re trying to steer you towards buying the more expensive option.
What steering can look like in practice?
Let’s look at how steering works in real life.
- Showing more listings to white homebuyers than minority homebuyers.
- Putting it another way, I’m saying that if you want to sell homes in predominately white neighborhoods, but only show them properties there, then your marketing will be ineffective.
- White clients are being advised to avoid living in poor minority areas out of “safety” concerns or using other euphemistic language, such as “you don’t want to live there; they have really bad schools.”
- To white homebuyers, but not to minority house-buyers. Disparaging minority communities to white clients.
In other words, if an agent isn’t giving professional service to their clients and making assumptions about what buyers of various races want without explicit instruction from those customers, they’re in danger of steering.
What are your rights in real estate?
What does steering mean in real estate? What are its causes and effects? How do people fall victim to being steered when looking at homes for sale or rent? How can people avoid being steered while looking for places to live?
Another way you can avoid being steered is by signing an agreement with your broker stating that if they help you find a home within your price range, they will be paid regardless of which property you ultimately purchase. This option isn’t offered to every client, but it’s definitely worth asking for if you feel like your broker is steering you towards one particular type of housing. This article is about “steering” in real estate and how people can be steered into buying one place over another.
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