You’ve been searching for your perfect home, and you finally find it after months of searching. You’re surprised that the home is listed lower than similar homes in the area. You submit an offer which is accepted, you successfully close escrow, and you move in. Months later, you hear from your neighbors that a gruesome murder occurred on the property, or the previous owner committed suicide in the house. You pour over the disclosures given to you by the listing agent and the seller and nothing mentions the death. Shouldn’t the seller or agent have disclosed the death?
Stigmatized Properties
A stigmatized property is a property which buyers or tenants shun for reasons unrelated to its physical condition or features. Such reasons can include death of an occupant, murder, suicide, serious illness such as AIDS, and a belief that the house is haunted. Stigmatized properties are also known as “psychologically impacted”.
What Must Be Disclosed?
Properties where someone has been murdered or died can be difficult to sell. Some people argue that it’s the duty of the real estate agent to disclose any inherently negative history of a property to prospective buyers, including whether it’s stigmatized. In most states, a seller isn’t required to voluntarily disclose nonstructural issues such as homicides on the property.
However, “material facts” must be disclosed. The states do not agree whether a death, murder, illness, or paranormal activity is “material.” For example, Florida’s statute states that “[t]he fact that a property was, or was at any time suspected to have been, the site of a homicide, suicide, or death is not a material fact that must be disclosed in a real estate transaction.” Similarly, Massachusetts law does not require a seller to disclose that a property has been psychologically impacted. On the other hand, California requires that any death on the property within three years of the date of sale must be disclosed, even if the death was of natural causes.
Caveat Emptor: Buyer Beware
The principle of caveat emptor, “let the buyer beware,” is still predominant. There are two notable exceptions. First, a seller and real estate professional cannot misrepresent any aspect of the house. This means that if a prospective buyer asks whether a death occurred on the property, the seller and agent must answer truthfully in a manner not aimed toward misleading the buyer. Silence is no defense. Even silence or evasive answers can constitute misrepresentation if an average buyer would have been misled.
Second, a seller must disclose important facts impacting the price of the property where that fact would not have been thought of by the buyer. Typically stigmatized properties are listed lower because they’re considered less desirable.
What if I Discover My House is Haunted?
There is no consensus among the states as to whether a haunted house must be disclosed. About half of U.S. states have laws that deal with stigmatized properties, but most don’t require sellers to disclose if they have a ghost. Massachusetts law speaks directly to haunted houses and states that property owners do not have to disclose if the property is the “site of an alleged parapsychological or supernatural phenomenon.”
There is one reported case from New York where the seller reported instances of paranormal activity in Reader’s Digest and local press prior to listing her home. Neither the seller nor her real estate agent revealed the haunting to the plaintiff before he entered a contract to purchase the house. The court held that because the seller reported paranormal activity in national and local press, seller was estopped from denying the ghosts’ existence as a defense. The court accepted the haunting as fact. Regardless of whether the house was haunted, the fact that the house had been widely reported as haunted detrimentally impacted its value. The court released the buyer from the purchase contract without the buyer losing his deposit or any funds on the transaction. While this case may be encouraging to those who unwittingly bought a house they believe is haunted, it appears to be an isolated case.