School Ratings: The Legal Gray Area

Sometimes, real estate selling can get tricky—such as when you're about to get an offer and the potential buyer asks, "So the schools around here are okay, right?"

Only, not really. Do you risk the sale with the truth? Water it down? Change the subject?

What are you legally required to disclose when potential buyers inquire about school ratings?

It turns out, that's a far more complicated question than you might think. The fact that housing values are directly influenced by school ratings is well known in the industry, with several studies pointing to good schools adding an average premium of $50 per square foot to property values.

These patterns are also reinforced by local property taxes, where assessments directly benefit school coffers. Some advocates for fair housing see potential problems with this whole scenario, and that's a complication that may surprise you.

School rating maps mirror racial dot maps

While most states base school ratings on easily measured factors like test scores and graduation rates, these key indicators turn out to be heavily influenced by race and class. This "common denominator" is now raising issues regarding disclosures to potential buyers, and has intensified with today's ease of access to web-based information.

Hands off the wheel

Current fair housing laws dictate the statements that agents can make, prohibiting the discussion of neighborhood racial composition with home buyers. Dubbed "racial steering," the National Fair Housing Alliance regularly conducts "mystery shopper" tests – of which a 2006 report documented steering in some 87% of encounters: Showing different properties to families of different races with the same requirements, or telling each group different things about neighborhood desirability in a way that perpetuates discrimination.

Until legalities can be settled, putting the onus back on buyers may be in your best interest.

To view the original article, visit the Properties Online blog.