Blockbusting
Blockbusting is an illegal practice where real estate agents induce homeowners to sell by exploiting fears about racial or ethnic groups moving into the neighborhood, then profit by reselling to minority buyers at inflated prices.
Exam Tip
Blockbusting = panic peddling = inducing sales through fear of demographic change. ILLEGAL under Fair Housing Act!
What is Blockbusting?
Blockbusting (also called panic peddling or panic selling) is an illegal real estate practice where agents deliberately create fear of declining property values by suggesting that people of a particular race, religion, or national origin are moving into a neighborhood. The goal is to convince homeowners to sell cheaply, then profit by reselling at higher prices.
How Blockbusting Works
| Step | Action |
|---|---|
| 1 | Agent targets a neighborhood |
| 2 | Creates fear about demographic changes |
| 3 | Convinces owners to sell at low prices |
| 4 | Buys properties cheaply |
| 5 | Resells to minority buyers at inflated prices |
Blockbusting Tactics
| Tactic | Example |
|---|---|
| Fear mongering | "Property values will plummet" |
| False claims | "Everyone is selling and moving out" |
| Panic calls | "Sell now before it's too late" |
| Flyers | "We buy houses - don't wait!" |
| Solicitation | Door-to-door pressure to sell |
Fair Housing Protections
Blockbusting violates the Fair Housing Act of 1968, which prohibits:
- Inducing sales based on protected class changes
- Making representations about neighborhood changes
- Creating panic through deceptive practices
Protected Classes (Federal)
| Protected Class |
|---|
| Race |
| Color |
| Religion |
| National Origin |
| Sex |
| Familial Status |
| Disability |
Penalties for Blockbusting
| Penalty | Description |
|---|---|
| Civil fines | Up to $100,000+ |
| License revocation | Loss of real estate license |
| Criminal charges | Possible in severe cases |
| Civil lawsuits | Damages to victims |
| NAR sanctions | Industry bans |
Related Violations
| Practice | Definition |
|---|---|
| Steering | Directing buyers to/away from areas |
| Redlining | Denying services based on location |
| Blockbusting | Inducing panic sales |
Study This Term In
Related Terms
Steering (Fair Housing Violation)
Real EstateSteering is an illegal practice where real estate agents direct prospective buyers or renters toward or away from certain neighborhoods based on their race, color, religion, national origin, sex, familial status, or disability.
Redlining
Real EstateRedlining is the illegal discriminatory practice of denying or limiting financial services, insurance, or other services to residents of certain areas based on racial or ethnic composition rather than individual qualifications.