If a client asks you to list his house but tells you it was the scene of a gruesome murder or a suicide, or that the house is haunted, are you required to disclose this information to prospective buyers? The short answer is maybe.
Most states have disclosure laws pertaining to property condition and latent defects. The legal standard is that a seller must disclose “material facts” known to the seller that may influence a buyer’s decision. Common examples are a history of termite infestation or major damage from natural events. But when it comes to property that may have been the scene of a murder, suicide or even an AIDS related death, states are divided on the issue of disclosure. Courts have given no clear guidance either.
These psychologically impacted properties, defined as “stigmatized” by the National Association of Realtors, are harder to sell, if the particular fact or suspicion is disclosed, according to James E. Larsen, Ph.D. and Joseph W. Coleman, business professors at Wright State Univesity.
Larsen and Coleman did a study of more than 100 psychologically impacted houses. They found that they take 45 percent longer than comparable homes to sell, and price at an average of about 3 percent less. It is not surprising that many buyers will not buy a house where a gruesome crime or suicide has been committed.
At least 21 states have enacted laws, known as stigma disclosure statutes, concerning the (non)disclosure of psychological facts. In those states that have not enacted these statutes, there are no hard and fast rules about disclosing property stigmas. The disclosure laws vary from state to state. From the ones I have read, most do not require disclosure of defined “stigmas”. California and a handful of other states do, however, require the disclosure of recent murder scene houses.
Granted, murder is a known “fact”. But what about the case of a haunted house? Surely, proving the “fact” of a haunted house is impossible and disclosure therefore unnecessary.
Well there was a haunted house case. And the buyer won!
The case is Stambovsky v. Ackley (169 A.D.2d 254, 572 N.Y.S.2d 72). It was decided in 1991 by the New York Appellate Court.
Mr. Stambovsky, to his horror, discovered that the house he just bought in Nyack had undisclosed tenants. Unlike some tenants who just act like poltergeists, they were poltergeists. He also found out that the seller and her family had seen them too over the last nine years. In fact, Seller had publicized the ‘hauntings” to Readers Digest and the local media. The problem was that Mr. Stambovsky was not a “local” privy to this information (and probably didn’t have a local buyer’s broker). And the seller’s broker did not disclose it. The buyer sued to rescind the contract and the Court, “moved by the spirit of equity”, cast out the contract and ruled that Mr. Stambovsky’s downpayment should be made to reappear in his pocket.
Now, before brokers add “Is the house haunted?” to their listing questionnaire, note that this case is the exception and not the rule. The Court stated that a real estate broker in New York is under no legal duty to disclose to a potential buyer the phantasmal reputation of a house. Any buyer who sues for fraudulent misrepresentation in such a case would not have a “ghost of a chance” of winning, said the Court.
Since the seller had publicy promoted the hauntings, she was estopped to deny the “fact” and equitable principles of law demanded she refund the buyer’s downpayment for her concealment to him.
For more information on the laws surrounding disclosure of stigmatized houses see the article Stigma Busters, written by attorneys Marc Ben-Ezra and Asher Perlin.
Postscript: In a case of stigmatized property it is unlikely that Zillow will give you an accurate valuation. So who ya gonna call? Well, you can call Randall Bell of Bell Anderson & Sanders of Laguna Beach, CA, an appraiser who specializes in diminution-in-value cases and stigmatized properties. Mr. Bell, affectionately known as the “Master of Disaster”, was consulted on the appraisal of Nicole Brown Simpson’s condominium after her murder.
Jonathan Miller, who we gonna call at Miller Samuel?
We have worked on such cases and helped to clear the property of unpleasant energies. One case was where the house (a really nice place, old, well-decorated etc., etc.,) had been on the market for two yearrs with virtually no interest at all. After we had worked on it, someone came round, looked, liked and bought it, within four weeks. It really does work!
I wonder if having some sort of proof of such work might be in the interest of both buyer and seller?
Some people, after all, like the idea of a haunted house, whilst others don’t and still others don’t believe in such things, so i suppose it might be difficult to find common ground there. Still, worth a thought, don’t you think??
Yesterday I had my real estate test, one of the questions was about hunted houses. The listing agent who also represents buyers show his house to them, at the house he tell them about cracks in the fireplace, problems with the water presure, etc, and he also tell them that the owner think the house is haunted, is this is a matter to disclose, please email me back, I am going to retake my test on monday. thankyou for your help. consuelo sneve, from
south Dakota.
I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you down the road!