PSI Virginia Real Estate Practice Exam

What is blockbusting in real estate?

1. Encouraging low-price sales due to neighborhood changes

2. Restricting sales to certain demographics

3. Promoting new developments in high-value areas

4. Assessing property values before sales

The correct answer is: Encouraging low-price sales due to neighborhood changes

Blockbusting in real estate refers to the practice of encouraging property owners to sell their homes at low prices by instilling fear of neighborhood decline due to demographic changes, such as the arrival of minority groups. This tactic exploits racial fears and prejudices to prompt homeowners to sell quickly and often below market value. Real estate agents or developers might then resell these properties at a profit to incoming residents or investors, capitalizing on the rapid turnover that blockbusting creates. This practice not only has negative ethical implications but is also illegal under the Fair Housing Act, which aims to prevent discriminatory housing practices. The focus on low-price sales in response to perceived changes in the neighborhood distinctly defines blockbusting, as it manipulates market perceptions and the decisions of homeowners.