The unethical practice of blockbusting in real estate
Blockbusting is an unethical and illegal tactic used by some real estate agents to scare homeowners into selling their properties below market value. This predatory practice involves agents trying to convince homeowners that a demographic change is coming to their neighbourhood, such as an influx of minorities, which will lower property values and quality of life. The agents then offer to buy the properties at reduced prices, often further scaring homeowners with tales of vandalism, crime waves, and declining schools. Once they purchase the homes, the agents then turn around and sell them at market rates to the very people they claim would be moving in.
History of blockbusting
Blockbusting rose to prominence in the 1950s and 1960s as African Americans began integrating white neighbourhoods across the United States. Real estate agents would mail flyers and knock on doors warning white homeowners of the impending demographic change. They would then offer these frightened homeowners cash for their properties, often adding incentives like paying closing costs or buying homes sight unseen. The agents would then turn around and sell the homes to African American families desperate to move into nicer neighbourhoods, pocketing the profit.
Additional reading: Quirky property developer tactics in a slow market
The practice of blockbusting
Blockbusting is not just unethical – it is also illegal. The Fair Housing Act of 1968 (in the USA) banned blockbusting tactics and made it unlawful to induce or attempt to induce a person to sell or rent their home based on the changing demographics of their neighbourhood. This includes representations about the safety or decline in property values a neighbourhood will experience. Despite the federal ban, blockbusting has not been fully eradicated and some realtors still engage in scare tactics to earn higher commissions.
Victims of blockbusting lose more than money – they lose their sense of security. By preying on racial fears, blockbusting unravels communities and prevents diverse neighbourhoods. Homeowners should be aware of the practice and warning signs like flyers warning of demographic changes. If confronted with a blockbusting agent, homeowners should stand firm and not be bullied into selling their homes before they are ready and for less than it is worth. While blockbusting may seem like an ugly practice of the past, its legacy remains and requires continued vigilance in the real estate industry.
