PSI New Jersey Real Estate State Practice Exam

What practice involves passing out misleading information to encourage homeowners to sell their property quickly due to demographic changes?

1. Steering

2. Redlining

3. Blockbusting

4. Predatory lending

The correct answer is: Blockbusting

Blockbusting is the practice described in the question, as it involves the dissemination of misleading information to instigate unnecessary fear among homeowners about demographic changes in their community. Real estate agents or investors may exploit this fear by suggesting that property values will decline, prompting homeowners—often from a specific demographic—to sell their homes quickly, sometimes at below-market rates. This practice is not only unethical but also illegal, as it promotes racial segregation and discrimination. In contrast, steering refers to the practice of guiding potential homebuyers towards or away from certain neighborhoods based on their race or other protected characteristics. Redlining is a discriminatory practice where financial institutions refuse to offer loans or insurance in specific areas based on the racial or ethnic composition of that area, effectively segregating communities economically. Predatory lending involves unfair, deceptive, or fraudulent practices during the loan application process, often targeting vulnerable borrowers but does not directly relate to the sale of homes based on demographic changes. Thus, blockbusting appropriately encompasses the actions described in the question, making it the correct answer.