As a real estate professional, you are an influencer in your community.

You’re in a unique position to move the needle in addressing racial disparities that exist in housing, which can contribute to breaking the cycle of poverty and lead to long-term economic stability for families. Homeownership tends to provide better access to education, resources and even a lower prevalence of chronic health conditions according to a recent study by the Center for Disease Control.   In the past ten years, low-income households have gained $98,900 in net worth from homeownership because of the appreciation of real estate and middle-income households have realized gains of $122,100 in wealth. 

Unfortunately, much of this wealth-building opportunity did not accrue to the benefit of historically underserved communities.  In 2022, homeownership among White Americans was around 72%, while historically underserved groups continue to lag with Hispanics at 50%, Asians at 63% and African Americans at just 44%. Because of changing demographics across the country, forecasts for the decade(s) to come demonstrate strong growth in homeownership among historically underserved communities and a net decline in the formation of new white households. This demographic shift recognizes not only the moral imperative of serving these communities, but the opportunities associated with doing so. To begin to capitalize on this opportunity; however, these professionals require “an increased understanding and commitment to resolve the obstacles faced”.

What are the existing barriers to homeownership?

There are many obstacles that impede homeownership among the historically underserved. Many of these are systemic, or policy-driven and may feel overwhelming. However, some are obstacles that can be overcome with a one homebuyer at a time approach and with the aid of committed and knowledgeable real estate professionals at every step of the home buying journey. 

Lack of Knowledge / Buyer Insecurity

Some future homebuyers in underserved communities may be the first homebuyers in their families. A study conducted in 2022 revealed that almost 80% of first-time homebuyers qualified for down payment assistance programs, but only 13% took advantage of those programs. This shows that some prospective first-time buyers are not aware of programs that may exist to open door to homeownership.

Those who are a part of these underserved communities may find it more difficult to enjoy the benefits of easy access to trusted advisors and may often not even be aware that they are eligible for homeownership.  Many of these future homebuyers will also feel overwhelmed by the myriad “moving pieces” associated with the acquisition of a home including credit management, loan evaluation, home selection, and the complexities of the closing process itself. 

What Real Estate Professionals Can do

• It is perhaps in this area that a knowledgeable real estate professional can provide the greatest value. The development of a relationship as a trusted advisor; however, requires a long-term investment and is not simply transactional. That development requires you to know more than how to find a home, or draft a form contract or apply for a mortgage. Here you have a significant opportunity to learn more to be more and in so doing to provide significant, comprehensive, and last value to future homebuyers. Programs like the NAHREP 10 Certified Trainer Program provide a comprehensive yet achievable educational program for interested real estate professional to become certified in a wide array of priorities, principles and concerns that are essential in developing successful homebuyers. 

 Financial / Credit Impediments and Constraints

Many historically underserved communities have been impaired in their efforts to achieve homeownership due to challenges associated with traditional financial requirements and credit programs. Let’s look at home purchase application denial rates, for example. According to the CFPB, Black and Hispanic white borrowers had notably higher denial rates in 2022 than non-Hispanic white and Asian borrowers. Among home purchase applications, the denial rates were 16.8 percent for Black applicants and 12.0 percent for Hispanic white applicants, both of which were higher than 2021 denial rates. In contrast, the denial rates of home purchase applications were 9.6 percent for Asian applicants and 6.7 percent for non-Hispanic white applicants.

Generally, mortgage programs, for the sake of convenience rely on a scale with requirements that may not fully reflect the probability of repayment of a borrower but is used because it’s easily available to the lender and has a long history of use. Also, down payment requirements can often be a big impediment to homeownership particularly in underserved communities, since accumulating a large amount of liquidity can be impossible even where family income is otherwise fully able to support a mortgage.

What Real Estate Professionals Can Do

• There are many programs available from mortgage lenders, government agencies, and non-profits to assist with these impediments. However, these programs are of little use if a real estate professional is not aware of them and can’t help to point a potential homebuyer in the right direction. For example, many mortgage programs now permit the use of a Taxpayer Identification Number (“TIN”) instead of a social security number for taxpayers that are not eligible for a social security number but would otherwise qualify for a mortgage. 
• Some mortgage programs allow for family pooling, or gifts to facilitate a mortgage rather than the historical norm of requiring the source of funds to come from a buyer’s sole capital. Many local governments provide aid with down payment in the form of forgivable loans or other similar type programs to mitigate the challenges of accumulating a large sum of money all at once. Being aware of these and other available resources can be an indispensable asset in pointing their customers in the right direction and turning a “no” into a “yes”. 

Cultural Norms and Expectations in Homebuying

It is a reality that the historically underserved often feel more comfortable, encouraged, and empowered having access to people within their communities and those who otherwise have a thorough understanding for their cultural norms and expectations. For example, Hispanics are the fastest-growing population of homebuyers, and 1 in 4 of these families completes the process entirely in Spanish, according to the National Association of Hispanic Real Estate Professionals®. This means from the offer to the closing, Spanish-speaking homebuyers will need to understand and communicate sensitive financial information. In this case, working with a buyer’s agent who speaks Spanish is helpful.

The agent needs to understand the challenges specific to the historically undeserved and a recognition that they may have specialized needs in the delivery of services from the professionals they choose to work with.  In some cases, this may also require attention to and recognition of language related services, as a lack of proficiency in the language can make an already intimidating process, a complete “black-box”.

What Real Estate Professionals Can Do

• Be open to the cultural and preferential differences among underserved communities. This may require deeper education into the needs and norms of the community but requires an openness to learn and a demonstration of that openness, whether as a member of the community or an ally of it. You can become a part of the communities you wish to serve through involvement in community events or advocacy groups. You may also sponsor formal educational workshops or collaborate with other local organizations to raise awareness about homeownership related issues and opportunities specific to the identified community.

While helping anyone to realize the dream of homeownership is a special gift bestowed upon those in the real estate industry, the ability to reach into a community that is historically undeserved and lend a hand to raise that community up one person at a time is particularly rewarding. In this time of major demographic changes, it is also an immense commercial opportunity. By bringing knowledge, alleviating insecurity, and embracing all of our differences, real estate professionals can play a transformative role in advancing homeownership for all.

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About Eric Jacobs, Esq.
Eric Jacobs, Esq., is a President at Anywhere Integrated Services. He oversees our subsidiary companies Clear Title Group, Burnet Title Illinois and Pro National Title. A lawyer that specializes in the real estate industry and with a particular passion for and interest in the digital transformation of real estate, he is a strong contributor to strategizing ways to improve the end to end real estate consumer experience.  Follow him on LinkedIn. 

This material is meant for general illustration and/or informational purposes only. Although the information has been gathered from sources believed to be reliable, no representation is made as to its accuracy. This material is not intended to be construed as legal, tax or investment advice. You are encouraged to consult your legal, tax or investment professional for specific advice.