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Stigmatized Housing — Will Ghosts Get Your Equity?

Murder and mayhem are the common stuff of each day’s news, events which create a strange and bizarre real estate issue, the matter of “stigmatized” homes.

It’s easy to understand that the value of a home will be reduced if the roof leaks or the basement floods, but matters become more complex when the issue is psychological rather than physical.

Suppose a home is in flawless physical condition, but suppose as well that it’s also been the site of a murder or a suicide. Everything works, nothing leaks or floods, but is the home as valuable as a similar property where such events have not occurred?

Some prospective buyers would plainly be discomforted by such news with the result that either they would not bid on the property or they would reduce their offers.

While the feelings of many buyers are entirely understandable, it’s also easy to see that sellers may be unfairly hurt in this process.

Suppose a home is the site of a suicide or murder. If the individual who died was a friend or relative of the owners, they no doubt feel enormous loss and perhaps wish to move. But under some state rules, when they offer their home for sale the owners must tell buyers of recent events at the home, thereby lowering its value.


The catch is that a number of states have so-called “stigmatized housing” rules which say that owners and their brokers need not disclose the events at the home related to suicides, accidental deaths, natural deaths, ghosts, or felonies. These rules are inconsistent, however, so that the disclosure requirements in one state may be vastly different than another. And many states have no rules dealing with stigmatized homes, a legal gap which offers no guidance to buyers, sellers, or brokers.

The result is that what must be said depends on where you live. A murder, for example, may have to be disclosed in one state, not disclosed in another, or disclosed today but not after several years.

Moreover, HUD has taken the position that owners and their brokers can say nothing if an owner has AIDS or has died from AIDS. The logic is that those with AIDS have a disability and are therefore a protected class under federal anti-discrimination rules.

In looking at the various guidelines which impact stigmatized homes, it’s little wonder that state rules are often divided on this issue. Stigmas relate to personal values, preferences, and perceptions, matters difficult to legislate.

If you own a property which is or may be sitgmatized, or if you are considering the purchase of such a property, be certain to first speak with knowledgeable brokers and attorneys in your state to see what disclosures, if any, are required.

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Published originally by Realty Times on May 25th 1999 and posted with permission.

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