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Blockbusting is the practice of inducing homeowners of a particular neighborhood to sell their homes at a loss. It is conducted usually by creating a fear on the owner of the property that there in a reduction in the value of the property. Blockbusting was a business practice of U.S. real estate agents and building developers that is meant to encourage white property owners to sell their houses at a loss. The practice of blockbusting is considered as an illegal act and banned by many state laws.
Following is an example of a state statute (Maryland) defining blockbusting:
Md. BUSINESS OCCUPATIONS AND PROFESSIONS Code Ann. § 17-608,
(2) Whether or not acting for monetary gain, a person may not knowingly induce or attempt to induce another person to sell or rent a dwelling or otherwise transfer real estate or knowingly discourage or attempt to discourage another person from buying real estate by:
(i) making representations about the entry or prospective entry into a neighborhood of individuals of a particular race, color, sex, religion, handicap, family status, or national origin;
(ii) making representations about the existing or potential proximity of real property owned or used by individuals of a particular race, color, sex, religion, handicap, familial status, or national origin; or
(iii) representing that the existing or potential proximity of real property owned or used by individuals of a particular race, color, sex, religion, handicap, familial status, or national origin will or may result in:
1. the lowering of property values;
2. a change in the racial, religious, or ethnic character of the block, neighborhood, or area;
3. an increase in criminal or antisocial behavior in the area; or
4. a decline in the quality of schools serving the area.