Would you live in a haunted house? what about a home where someone recently passed away, or a home where a violent crime took place? Most potential home buyers want to purchase a property that is free from any ghosts, spirits, or other bad juju. Some buyers, however, might be willing to live in a home with a troubling history if it means the price of the property is decreased. Either way, it is important for sellers to understand what stigmatized property is, and whether they have a duty to disclose circumstances that stigmatize a property.
What is a stigmatized property?
The National Association of Realtors define a stigmatized property as "property that has been psychologically impacted by an event which occurred, or was suspected to have occurred, on the property, such event being one that has no physical impact of any kind." Usually, a property is stigmatized due to an emotional or unsettling event taking place on the property such as a murder, suicide, or sexual assault. Properties can also be stigmatized due to a notorious previous owner or if the property has a reputation in the community for being haunted or being host to paranormal activities.
Duty to disclose.
Stigmatized property laws vary by state. Most states do not require the seller to disclose events which may have stigmatized the property, making it the responsibility of the buyer to discover these facts. Some states, however, do require disclosure if a death occurred on the property due to a condition of the home.
In Iowa, there is no obligation to disclose events such as murder, suicide, or death. There is also no requirement that the seller disclose any other sort of psychologically distressing event such as a haunting or other paranormal activity. It is the responsibility of the buyer to discover these facts. In contract, South Dakota requires sellers to disclose whether there was any homicide, suicide, or felony that occurred on the property in the last 12 months. Nebraska has no law relating to stigmatized properties, which may leave sellers liability if they do not disclose such facts.
The National Association of Realtors recommends that their members disclose facts which could impact a reasonable buyer's decision to purchase the property. For example, a reasonable buyer might not care that an elderly occupant passed away at the property in their sleep. However, most reasonable buyers would want to know if the property was the site of a mass murder.
A seller or real estate agent must be honest when asked about any stigmatizing facts impacting the property or they could be held liable for fraud. This means buyers should ask whether there are any stigmatizing circumstances surrounding the property.
Not a "Death Sentence" for sellers.
Although it might take some time to find the right buyer, and the right price, owning a stigmatized property isn't necessarily a death sentence for sellers. A survey from Realtor.com revealed that 26% of the participants were unwilling to live in a home where someone died, but 40% of respondents indicated they would be willing to live in a haunted house if it lowered the price of the house.