What Does Blockbusting Mean In Real Estate?

What Does Blockbusting Mean In Real Estate?

Blockbusting is the practice of real estate agents urging residents to sell their properties for low prices out of worry that changing socioeconomic demographics will diminish property values; blockbusting was prevalent in Chicago throughout the 1960s and 1970s.

Also discriminatory is the practice of pushing homeowners to sell below market value since the neighborhood’s socioeconomic status is deteriorating, notably due to the inflow of minorities.

In addition to pushing minority homeowners out of the neighborhood, blockbusting can also target homeowners of other races.

This is similar to the practice of red-lining, which is the act of drawing lines on maps walls and floors boundaries to denote areas where low-income people reside.

The purpose of this discriminatory practice is to prevent those living in economically depressed neighborhoods from finding a larger place in society, buying a house and raising their own family.

What Is An Example Of Blockbusting In Real Estate?

A real estate agent hiring a Black woman to walk her dog in an all-White neighborhood is an illustration of blockbusting.

 They then post their real estate card in all of the mailboxes on the street and offer to purchase the house immediately at a discount amount of money. If the homeowner sells their house quickly, then they will be able to get rid of it before anyone else moves into the neighborhood.

Also another example would be if a real estate agent wanted to sell someone’s house for a lower amount of money. They would post their real estate card in the neighborhood, and tell residents if they want their house sold for less than market value, then call the real estate agent.

Also another reason why an agent may want to sell someone’s house for a lower amount of money is because they are lowballing on how much they wish to pay. This way the homeowner knows that it will be worth less than what they have been offered.

What Is Another Name For Blockbusting In Real Estate?

Another name for blockbusting in real estate is white flight. White flight is when house prices decline and then White people move out of the neighborhood due to concerns about property values. This is a clear example of blockbusting as well.

White flight is when White people move out of the neighborhood due to property values and concerns about the neighborhood’s socioeconomic status. This can cause for a community division between races, since Whites do not wish to live in neighborhoods where minorities reside.

Another way blockbusting can be seen in real estate is by using social media sites such as Facebook and Twitter.

Urban areas have undergone significant demographic changes since World War II. One result of these changes has been an increased demand for housing in many urban areas. At the same time, however, there has been a decline in housing supply in many cities.

When Was Blockbusting In Real Estate Started?

In the early 1960s with the article Confessions of a Block-Buster, this detailed how realtors profited by coercing with white Americans to sell at a loss in order to relocate to racially segregate better neighborhoods quickly.

In response to political pressure from sellers and buyers, states and municipalities have legally restricted door-to-door real estate solicitation and posting FOR SALE signs.

 They have authorized government licensing agencies to investigate the blockbusting complaints of sellers and buyers to revoke blockbusters’ real estate sales licenses.

What Is Blockbusting In Terms Of Real Estate?

This refers to profiteering by persuading property owners to sell quickly and frequently at a loss by appealing to their anxieties about reduced property values due to the prospect of minority invasion and then reselling the properties at inflated prices, often to minority buyers.

This practice refers to the activities of real estate agents in urban areas that promote the property and home sales by frightening homeowners into believing that racial minorities are entering a neighborhood, leading to decreased property values.

Similarly, a real estate developer may buy up several properties in a poor neighborhood in hopes of turning them into higher value real estate blockbusters can do the same thing. The difference is that blockbusters may profit from the process because they maneuver the property from one owner to another.

What Are The Methods Of Blockbusting In Real Estate?

There are different methods of blockbusters that you can refer to in real estate.

  • Interest rate manipulation– This is when someone takes advantage of changes in interest rates resulting from economic cycles and then uses unethical tactics to make large profits for themselves.

Examples include using negative amortization or reverse amortization mortgages, which are used together to create high amounts of debt for a homeowner.

  • Switching tactics– This is when someone uses a different approach that does not work and then attempts another method to get the desired outcome. An example of switching tactics is when a blockbuster would offer less money than the home’s current worth in the attempt to buy a house at a lower price.  

This usually occurred before blockbusting techniques were made illegal. This is similar to predatory lending and may include some of the same unethical practices used with that practice of selling without a proper license.

  • Pressure selling – This is when someone employs unethically made threats of violence to get a sale. This can be used by real estate agents or the bank itself and causes a lot of stress for the victim.
  • Coercion – This is when someone makes an unethical threat to force a sale in order to maximize sales and profits.
  • Deceptive practices – This is when someone uses unethical methods like lying in order to achieve their goals.

Is Blockbusting In Real Estate Legal?

No, most state statutes prohibit the practice of blockbusting as a criminal crime– Some of these states include Oregon, North Dakota, and Virginia. In Virginia, Blockbusting is considered a crime that should be dealt with as a serious offense by the Commonwealth.  

In addition, federal laws make it illegal to engage in any type of blockbusting. These laws are included in the Real Estate Settlement Procedures Act (RESPA), which regulates how real estate closings must be handled.

Federal statutes such as the Fair Housing Amendments Act (FHAA) prohibit people from discriminating against others in housing practices by using racial, religious, and ethnic criteria.

In addition, the Attorney General can bring a lawsuit against blockbusters for violating the equal rights of others in the residential housing market.

What Is The Difference Between Steering And Blockbusting In Real Estate?

  • Steering– refers to the act of real estate agents or home sellers that are attempting to cause someone to move away from a neighborhood due to declining property values. It is also known as redlining and the use of racial or ethnic criteria to determine who is able or can qualify for a mortgage.

In this case, if a real estate agent were steering away from a home that means that they would refuse to sell the home because of the nearby residents.

In blockbusting, this is when real estate agents try to convince the property’s current owners to sell their property quickly and at a financial loss as a result of racial integration into their neighborhood. Steering and blockbusting are illegal under federal law.

  • BlockbustingThis is when real estate agents and others take advantage of people by using unethical techniques to get them to sell their homes at a price that is below their actual value. Note: Steering, blockbusting, and predatory lending are all illegal under federal law.

Is Blockbusting Illegal In Real Estate?

Yes, Blockbusting is illegal under federal law. Federal laws prohibit real estate agents and others from using unethical means to persuade homeowners to offer their property at a lower price.

Blockbusting is also illegal in many states and jurisdictions because it causes financial loss to the seller. In some cases, the seller may be forced to leave their neighborhood, which could lead to a complete loss of personal identity.

In addition, it is illegal for a real estate agent to take advantage of a homeowner who is facing foreclosure. This occurs when the homeowner is often presented with more than one loan modification offer from different lenders, which can result in losing the interest rate previously negotiated.

What are some of the unethical methods used by real estate agents during blockbusting?

  • Under-evaluation – This is when the method used by a real estate agent to determine the value of a property is flawed. Under this method, payments or appraisals that do not consider the actual appropriate values for the property will be performed.

Sometimes, this is done because real estate agents are trying to sell a home for less than it’s worth so that they can make money at closing.

  • Lying – This is when real estate agents mislead homeowners about the actual value of their home. This can be done by falsifying statements and details in order to make someone believe that they are getting more than they actually are. c. Deceptive practices.

This is when other real estate agents who wish to obtain a homeowner’s property will mislead them in an effort to obtain the property, which could cause a financial loss for the homeowner.

  • Coercion or intimidation – This is when real estate agents’ use unethical means to obtain a property. This can be done in various ways, including through threatening, physical harm, or using a weapon.

These methods usually cause the homeowners to feel threatened, which is what causes them to agree to sell at a lower price.

  • Fraud : is when certain details are omitted from a transaction that could seriously impact the homeowner’s financial status.
  • Forgery – This is when real estate agents falsify any forms, documents, or other types of legal documentation.

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