What Do You Need to Know About Stigmatized Properties?

Photo by Joshua Case on Unsplash

Here’s a scenario: You found a seemingly perfect property to be called home that’s just right or even below your budget range. It is newly painted, with an updated kitchen, and is located in a good neighborhood. You learned from the property disclosures document that you just need to do very minimal repairs before you move in and you don’t need to spend much. But later on, after you and your family moved in, you start to experience some weird stuff like unusual footsteps from the hallways in the wee hours, or perhaps the smell of popping popcorn in the kitchen but couldn’t find any. After sharing your odd experience with a neighbor, you were told that your home was previously owned by a person who died inside the property’s kitchen. What’s even bothersome is that family members of the previous owner were notorious in the neighborhood for practicing witchcraft.

As a first-time homebuyer, you should ensure to get from the seller a copy of the document containing property disclosures to help you decide if you’re going to pursue with the purchase or not. This document lets you know if there are costly physical defects like broken plumbing or roof damages that could compromise the property’s structural integrity. Home sellers in most states are required to furnish a property disclosure document. Afterwards, you also need to get appraisal and inspection reports for you to further determine a property’s value and integrity. Although such documents give you important structural information about the home you’re about to buy, it will not tell you if the property had a disturbing history that could be a concern later once you and your family have moved in.

Stigmatized properties: the unseen defects that make a home undesirable

A property is considered stigmatized if there are emotional or psychological reasons that could make it undesirable for the homebuyer. Even though you’re about to get a good discount, you may shun a property if it is haunted, or if there were violent crimes like murder or sexual abuse that took place in the property or anywhere within its premises. A good example of a stigmatized property is the infamous ‘legally haunted’ mansion in Nyack, New York. If you’re just looking at a Trulia listing, part of the description goes like this: “This perfectly restored classic is located on one of Nyack’s prettiest tree lined dead end streets.” Then succeeding statements say that it was previously owned by film director, Adam Brooks, and musicians Ingrid Michaelson and Matisyahu. The description doesn’t reveal anything about the Ackley’s, a family who also owned the same property from the 1960s through the 1980s.

Helen Ackley and her family, who lived in the same home, alleged that the home was infested with ghosts. Ackley’s story even landed on a local newspaper and the Reader’s Digest. Jeffrey Stambovsky who bought the property in the late 80s filed a lawsuit, that reached all the way up to the New York Supreme Court, requesting for the rescission of the contract of sale and for damages for fraudulent misrepresentation claiming that disclosures should have involved potential ghost infestations. In 1991, the New York Supreme Court, Appellate Division promulgated its decision which is commonly known today as the “Ghostbuster ruling”. In the decision, the court affirmed the dismissal of the fraudulent misrepresentation action and stated that the realtor was under no duty to disclose the haunting to potential buyers, however, it was held that a house, which the owner had previously advertised to the public as haunted by ghosts, legally was haunted for the purpose of an action for rescission brought by a subsequent purchaser of the house.  

State laws vary in disclosing stigmatized properties

Sellers or their agents must always be truthful with property disclosures. However, in most states, sellers or their agents are not required to tell a prospective buyer if the property had a dark history. In the state of Iowa for example, home sellers are not required to tell buyers if there are ghosts in, or if there are violent crimes like murder that took place inside, the property. On the other hand, in California, sellers and their agents are required to disclose that an occupant died inside the home within the past three years.

It’s up to the homebuyer to dig the unseen history of a property

For some homebuyers, an emotionally or psychologically flawed property might not be an issue especially if they think that they can get a great discount. However, if paranormal occurrences or violent crimes could affect your homebuying decisions, it is critical that you do your homework about the property that you’re about to buy. For a start, you may want to know first the mandatory disclosure of deaths by state for you to know if deaths are part of the required information that a seller must tell you. In some states, although sellers are not required to disclose deaths that are older than three years, there’s a law that requires them to disclose such information if the buyer asks about it. Then, if you have time to scout your prospective neighborhood, you may want to ask your would-be neighbors what they can say about the property. Your would-be neighbors might tell you a thing or two about the property that the seller or the agent doesn’t know or otherwise refrain from disclosing.

Final thoughts about stigmatized properties

A property is considered stigmatized if there are negative emotional or psychological occurrences that took place within the premises of a property. While mortgage application documents like appraisals, home inspections, and property disclosures reveal a property’s value and structural integrity, such documents do not bear information if the property had a past that you may find disturbing. As a homebuyer, it is critical that you do your due diligence to find out all the facts (and even hearsays) about the property you’re about to buy especially if you’re in a state where sellers are not required to disclose if a property had a horrible past.