Stigmatized Property

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Stigmatized Property
Stigmatized Property? Click on image to enlarge

We were out walking, here in Baltimore, when a neighbor stopped me and asked me about the property where we were standing.

“Have you heard that this house is haunted? A friend of mine was looking for a house to buy and was told this house was haunted. Do you know anything about it?”

The house looked perfectly alright to me. It was well cared for, the lawn freshly mown and bushes trimmed. What, I wondered, would a realtor say about the house to potential buyers, if was haunted or people thought it was?

What if you inherited a house where a suicide occurred? Are you required to report this fact as the seller?

I did some checking and found that houses in which a murder or suicide happened or where there are rumors of haunts or poltergeists fall under the subject of stigmatized property. “Stigmatized properties are homes where a real or rumored event occurred that didn’t physically affect the property but could adversely impact its desirability.”

Recall, that a seller has the obligation to disclose in writing that there are no hidden defects in the home:

“The common law has for decades imposed duties on sellers of real estate, particularly residential real estate such as homes, to disclose to the buyer any material facts known to the seller affecting the value or desirability of the real estate being sold.”

The laws are more lenient in the case of “as is” sales, but one still could not willfully cover up a problem that would adversely affect the value of the home to be purchased.

Now with stigmatized properties, the waters are a little murkier. The seller may not want a gruesome murder disclosed and if you are representing the seller, you have a fiduciary duty to the seller. If the seller is adamant that the information not be disclosed, you may not want to represent the seller.

Warren Crawford and Donald Allen White in their book “Maryland Real Estate: Practice & Law” put it best when they said “A licensee needs the express permission of sellers to reveal any of these matters to prospective purchasers or their agents, because such disclosure might impede the sale of the listed property … [i]n order to meet the requirement of trustfulness, they must answer prospects’ questions about these matters when given sellers’ permission.”.

If you are representing the buyer, this could be a material fact that requires sharing this news. Without telling your buyer, you could be misrepresenting the property and lose the buyer’s trust.

Some realtors like to ask, half in jest if there have been any murders or suicides on the property. If it is material and recent, the realtor should disclose the facts. The farther back in history the event happened, the better for the seller. Hauntings and superstitions are of the kind that you had to be there to believe.

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