![]() Now let’s look at a more subtle case and tricky ways investors and brokers can use blockbusting techniques to profit illegally in an area. As the definition of blockbusting states, convincing majority homeowners to sell below market value stating that minorities are moving into a community. He then repeats the process for every home in the neighborhood. Seller B offers to sell his house with broker A at a reduced cost.īroker A then turns around and, having bought the property at 70% value, markets and sells the house to a minority family for 100% value, instantly making 30% on his money. He then goes to all the neighbor’s houses, knocks on their door, and tells them that a minority family moved in down the street, with more to come, eventually leading to the area’s decline because of such a minority presence.īecause broker A says that property values will be cut in half within a year, seller B is concerned that he will lose money or live in a minority neighborhood. Real estate broker A sees a white neighborhood where a minority family has just moved. Now that we’ve seen what blockbusting is and why it is illegal, let’s look at some examples, beginning with a fairly obvious case that frequently happened before 1960. Unfortunately, blockbusting still occurs in the real estate industry, and you must be aware of what it is and how it works to ensure you are not guilty of it yourself. Agents would take advantage of “white flight,” where Caucasians would see African Americans moving into their neighborhoods and fear their property values would decline or not want to live near someone of another race.įortunately, blockbusting is now illegal, thanks to the Civil Rights Movement and the implementation of the Fair Housing Act of 1968. Blockbusting, redlining, steering, and any other form of discrimination in real estate became illegal and carried hefty punishments for those involved.īefore 1968, blockbusting was rampant, with real estate agents, brokers, and investors convincing people in neighborhoods to vacate because of a supposed decline in home values. This law prevented discrimination in the sale, rental, and lending of real estate based on someone’s race, religion, color, sex, familial status, disability, and national origin. In the 1960s, shortly after the Civil Rights Movement and Martin Luther King Jr’s assassination, President Lyndon B Johnson signed into law the Fair Housing Act of 1968. Why is Blockbusting illegal? – A Brief History of Blockbusting Typically blockbusting refers to racial discrimination between Caucasian and African American people however, it also applies to people of different religious beliefs, sex, age, familial status, etc. Panic selling is manipulating the values of the property to their advantage, at the cost of both buyer and seller. In this article, we’ll cover what blockbusting is, some examples, and of course, what you need to know to pass the real estate exam, so let’s go! What is Blockbusting?īlockbusting is the discriminatory practice of encouraging homeowners to sell below market value because the socioeconomics of the neighborhood is declining, specifically by the influx of minorities into that area.īlockbusting also relates to “white flight” or panic selling – a way for those in the real estate industry to capitalize on the discrimination of minorities. Like redlining and steering, blockbusting is an illegal act of discrimination that still happens frequently today in the real estate market.
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