About three years back a large number of real estate websites in USA were hit by by the now well known "Google real estate penalty". Basically these sites were trying to increase their page rank by exchanging links with real estate dealers in other parts of the country.
Manipulative Link Practices Done By Certain Real Estate Websites
These websites basically had link pages typically named links.html or links.htm and listed links of other real estate websites with which they had exchanged links. These sites were of those real estate firms located in other parts of the country.
The link on the links page would link with the home page of the reciprocal link partner. Typically there were hundreds of links in the links pages. It was extremely clear to Google that these links were traded solely for the purpose of increasing ranking and this tactic is in clear violation of Google Webmaster Guidelines. Such Link pages exist even today and thousands of Websites create them for the purpose of exchanging links. As soon as the number of such links crosses a threshold action may be taken against such sites also.
Google Guidelines On Link Schemes And Reciprocal Links
This is what Google has to say "Some webmasters engage in link exchange schemes and build partner pages exclusively for the sake of cross-linking, disregarding the quality of the links....." and "This is in violation of Google's webmaster guidelines"
Further Google elaborates what violates their guidelines. They clearly state that links intended to manipulate Page Rank, links to bad neighborhoods and excessive reciprocal links or excessive link exchanging as well as buying or selling links that pass Page Rank are in violation of their guidelines.
Effects Of The Reciprocal Link Penalty
After Google penalised the real estate websites they could not even rank for their own site name or unique title phrases from their site.
To get the penalty removed they removed the reciprocal links and submitted a re-inclusion request to get the penalty removed.

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