Stigmatized is an odd word to describe a perfectly good piece of property with a notable incident in its history. Indeed, stigmatized sounds like a pretty good deal, if you can buy a house at, say, a 10% discount because something happened in it.
Perhaps the house was featured in a film and of abiding interest to gawkers. Perhaps someone died there. Or a crime took place. The real or supposed negative psychological effects of these incidents on potential buyers can translate into a significant ding on the property value. If you’re a seller, though, you’re not going to be too enthused about offering that possible 10% discount.
So, what do sellers, buyers, and agents need to know about approaching such transactions? Must the seller disclose the past incident to the buyer? Let’s look at some scenarios, the industry’s view, and the law.
What’s Haunting the House?
Typically, the strongest concerns arise where events such as a violent death or crime happened at or near the property. Now and then, such a house comes up on the market, and does just fine. Al Capone’s childhood home, with its outdoor terrace space, was recently marketed as the perfect work-from-home buy. But there are certain crimes that no buyer will want to hear about — understandably. Maybe the incidents were recent, and buyers are wary of the address being somehow still caught up in legal or reputational trouble. Maybe there’s some physical evidence of violence (such as bullet holes) remaining. Or maybe just the idea of what went on in the house could diminish the psychological comfort of homeownership.
Sellers may reduce a lingering stigma by renovating the home, by seeking a change of the property’s address, or even by funding victim support groups. But some tainted homes are completely unmarketable, and end up in demolition.
Pro tip for buyers: The troubled backgrounds of former owners add up to one reason title searches before closing are so meaningful. Debts, liens, and court judgments show up in these searches. These can indicate, for example, that collection services could hound the address, or that back taxes are due.
The Industry’s View of Stigmatized Real Estate
Real estate people must follow state law and the rules of their professional associations. Additionally, these agents, appraisers, and financiers learn about stigma in their professional education and in their working experience. They study the principles of property valuation as it’s applied to various situations. If you sell a home anywhere around a stigmatized home, your agent will want to ensure that the lower valuation of that property is not among the home prices used in your home’s appraised value.
In some cases, a past incident is properly treated as a non-material issue, with no need to disclose. At the same time, the seller’s agent should display situational awareness. No buyer likes to think they were misled into paying more than they would have offered, had they known. And no seller likes a buyer to back out at the eleventh hour, after learning of a stigma from someone else. Even a buyer who’s unruffled by the home’s history could have fair and reasonable concerns about the value of the home to some future buyer.
An experienced seller’s agent might talk with the seller about making a “stigmatized” home sale work with various ideas, depending on the situation. If local chatter about the past incident is the biggest problem, for example, then perhaps a special house tour and coffee for the neighbors would be beneficial. It could air out the situation, helping neighbors process the past and welcome the new.
Disclosure of Non-Material Facts Not Required—Exceptions May Apply
Most states do not require a seller to disclose a murder, suicide, or other notorious incident that may have happened in or around the house. Consider Delaware, which doesn’t require stigma to be disclosed, because psychological impact is “not a material fact that must be disclosed in a real property transaction.” Yet Delaware law also says sellers have a duty to reply truthfully if a potential buyer asks.
Pro tip for buyers: Some stigma is so murky (think: haunting, paranormal activity) that no state requires its disclosure. If you have questions, you or your agent will need to affirmatively ask the seller.
Pro tip for sellers: Your agent has the responsibility to represent your best interest. That is, your agent has a fiduciary duty to you. The laws of most states direct reasonable disclosure of factors that bear on a home’s value. But as for non-material facts, your agent will follow state law, and avoid proactively disclosing stigma in a state that doesn’t require it — unless the buyer asks.
☛ Read more here about the difference between agents and brokers, and the special duties of agents to represent your best interest in a real estate deal.
Some States Require More Than Others
State law is the seller’s starting point; it must be followed. Many sellers will be relieved to know that their state does not expect disclosure of deaths or other potentially upsetting incidents.
Some states, such as Idaho, do not require the disclosure of nearby sex offenders. Nevada takes a similar stance, stating: “In any sale, lease or rental of real property, the fact that a sex offender…resides or is expected to reside in the community is not material to the transaction, and the seller, lessor or landlord or any agent of the seller, lessor or landlord does not have a duty to disclose such a fact…” (See NRS 40.770: “Limitation on liability of seller, seller’s agent and buyer’s agent for failure to disclose certain facts concerning property.”) Parents who are seeking a home in nondisclosure states can, however, find sexual crime maps online.
Most states require no disclosure of past crimes, except those involving meth labs, which can pose lingering dangers. In similar fashion, some states require a death to be disclosed only if caused by a hazard in the home. Was the death cause by toxic mold or a gas leak? If so, disclosure is required.
Deaths in a home for sale must be disclosed in some states, even if they have nothing to do with the property’s physical condition. California offers perhaps the strictest example. A death in a California home as long as three years ago presumably must be disclosed (given that state law says deaths more than three years ago need not be disclosed).
Maine goes the other way. Factors with psychological impact may not be disclosed without the seller’s express permission—in writing. Massachusetts rules out disclosure of crime, suicide, or any “supernatural phenomenon.”
Seems a cottage industry of amateur disclosure has emerged to fill the void, even in Maine and Massachusetts.
Because Each Home’s Past Is Unique…
Disclosure is complicated. For just a few examples:
- Even if your house is within the minority of states where sellers must disclose deaths, not all types of deaths must be disclosed.
- Federal law, which impacts every state in the country, bars disclosure that a resident died of HIV/AIDS-related causes. Most state laws explain that you need not disclose former residents’ illnesses, as long as they aren’t spread by contact with the structure of the home.
- Even if your state doesn’t require sellers to disclose that somebody died in a home, they would have to disclose if the death had happened in a fire.
If sellers don’t understand their state’s law, they can make mistakes, and be held liable by buyers for monetary losses that flow from a lack of disclosure. No website can give legal advice, because every case is unique, and the law has to be applied to each specific set of circumstances. You can only get legal advice from your own attorney, once you have signed a legal agreement and established an attorney-client relationship. So, in case of a disclosure dispute, contact a local real estate attorney.
We hope this article informs our readers, and shows how the facts and context of “stigma” vary widely from case to case. It’s just one more reason that real estate professionals are so important. There is no substitute for a diligent, knowledgeable, licensed professional when you buy or sell a home.
Supporting References
Trey Van Tuyl for OmegaHome.com: What Is a Stigmatized Property? Laws for All 50 States (Jul. 25, 2019).
Lauren Nowacki for the Rocket Homes.com: A Guide to Selling (Or Buying) A Stigmatized Property (Dec. 11, 2020).
Photo credits: Andrea Piacquadio, via Pexels.