“A prevailing theory among law makers appears to be that stigmatized properties are only stigmatized because of buyers’ superstitious predispositions. Because stigmatization does not affect the real value of the property, it need not be disclosed.”
In fact Renters.com conducted a survey of their readers and found that 31% of renters would not live in a haunted house for any price. Conversely, 51% of the respondents said they would live in an apartment with a ghost if the rent was free, and 27% said they would live in a haunted location for half price, and more males than females felt living with a spirit was acceptable if the perks were good enough. Notice that most people would only put up with a spirit for a decrease in rent, and therein lies the rub for the landlord or homeowner. What does one do if trying to sell a property with a troubled past (Wakefield Research, 2009)?
California was faced with its own property conundrum in 1983 with the Reed vs. King Decision. Dorris Reed, an older, single lady unwittingly purchased a house from Robert King. Mr. King sold her the home for $76,000 making no mention that ten years earlier a mother and her four children had been murdered there. Not only did King nor his agent tell Reed about the murders, but King further asked a neighbor not to mention the fact. It was only after Reed had bought the property that the neighbor made the information known.
In the first court case King and his agent were able to stave off rescission and restitution. But upon appeal the case was reversed. The court decision noted that not only had King not made any disclosure, but he’d gone out his way to make sure the information didn’t reach Reed, by his clandestine agreement with the neighbor. The court judged that while there was nothing materially wrong with the property, they did admit that the amount Reed paid was more than anyone else would have offered, because of the psychological stigma.
California State of Appeals, Third district’s judge, J. Blease, admitted that he was concerned about his decision, fearing that any buyer who felt their property was stigmatized in the future would be filing for restitution. According to the court’s written decision, “The paramount argument against an affirmative conclusion is it permits the camel’s nose of unrestrained irrationality admission to the tent. If such an “irrational” consideration is permitted as a basis of rescission the stability of all conveyances will be seriously undermined (Leagle, 2014).”
Stambovsky v. Ackley
Now it shouldn’t have been hard to find out the information as it seems Ackley had been capitalizing on the home’s reputation for some time. The home had been written about in the local newspaper and it had also become a stop on the Nyack, New York’s haunted walking tour. And in 1977 Ackley received $3000 for telling her story to Reader’s Digest in an article entitled “Our Haunted House on the Hudson.” Apparently she forgot to mention the ghosties to Stambovsky, however, who when he did come up to speed, sought rescission of his contract and recovery of his down payment. Ackley of course balked at returning the money, and the whole hot mess ended up in court.
The brief of the State Supreme Court’s decision is a pun-filled, tongue in cheek argument against the whole ghastly situation. The court did protect the realtor and seller for fraud, stating they had no legal duty to disclose the ‘phantasmal reputation of the premises (Loweringthebar.net)’” But then they did agree that Stambovsky should be able to seek rescission because the omitted history of the property might affect the property’s overall value. They summarized that the seller, “having both hidden and promoted the facts was, ‘offensive to the court’s sense of equity (Edmiston, 2008).’”
A stigmatized property or a property with a psychological impact is a property that may have absolutely no physical defects but has acquired, for whatever reason, a psychological or emotional stigma which therefore may reduce its value. For example, properties where a grisly murder occurred or where someone committed suicide are examples of stigmatized properties. Two Wright University professors conducted a study on stigmatized properties and found that such locations typically remained on the market 50% longer and netted a price tag 2.4% less than comparable properties. But the 2.4% may be overly optimistic. Susan Funaro cites a California appraiser specializing in diminution value issues who speculated that a highly publicized murder lowers a property’s value 15-30% (Funaro 2010).
Appraiser, Randall Bell, notes that the devaluation of a property where a murder took place decreases with time, but noted that it took 10-25 years for this to occur. All the appraisal experts agreed that the devaluation varied with the type of stigmatization. A home where a burglary occurred may be exempt from loss of value, whereas a property where a triple homicide occurred may sit on the market for years and sell at far below fair market value.
Of course on the opposite side of the spectrum, at times a resident spook can be good for business. A few years ago a ghost group with whom I was working got asked to meet with the director of a civil war era fort. The director’s idea was to raise money to refurbish the fort by capitalizing on its resident spooks. In one month, with weekend tours to the island, she hoped to raise $100,000! Indeed just about any older town or hamlet in the country has its share of walking ghost tours, or haunted house tours. A resident ghost can, under the proper circumstances, be a financial gold mine.
Stigmatized Property and State Laws
A prevailing theory among law makers appears to be that stigmatized properties are only stigmatized because of buyers’ superstitious predispositions. Because stigmatization does not affect the real value of the property – the walls, roof and floors – a superstitious bias has no grounds in valuation. In other words, if you feel skittish about buying a property where a murder-suicide occurred, it’s your problem for having archaic superstitions in the first place, and not the responsibility of the broker or seller to disclose (Edmiston, 2011).
And if you find yourself locked into an agreement to purchase a property that you find has a stigma, you have no recourse in many states to get out of the deal. Then there’s the idea that you may have overpaid for a property that has a lowered value because of the stigma, as Reed vs. King demonstrated. And what do you do when you try to sell the property? Personally, I find this stance exceptionally pompous.
And yet lawmakers make a case too, that what happened on a property in the past should in no way hinder a current owner’s enjoyment of a property. Case in point, we found out, from neighbors after we had purchased our house that our property had once been the site of a suicide. A terminally ill farmer jumped from the roof of his barn which had been located at the south edge of our yard. Barn, roof and farmer were all long gone by the time the house was built. For us it became part of the local folklore versus something we worried about. When we do, as we often do, come across old tools or pieces of glass we display them on a shelf as memorabilia of times gone by. The history of the property doesn’t in any way detract from our enjoyment of the pool, for example. It has become for us more a conversation starter than a deal breaker.
But then there are different levels of stigmas. For example, finding out that Farmer Brown jumped from the roof would be different than say finding out that the property had once been the site of a multiple homicide. And then there’s the Maryland case in which homeowners found out, after the fact, that their property was a graveyard. (So much for enjoying the pool on that property!)
Hickman vs. Carven
Unhappy with this result the Carvens appealed the matter to the Maryland Court of Special Appeals which reversed the first verdict, saying in effect flattening a cemetery and then hiding the fact was not something that § 5-108 had been written to protect against. The Court of Appeals allowed the Carvens the ability to sue the Hickman estate. The judges further admonished the Hickman’s for having decimated a cemetery in the first place, a property that should be seen as sanctified ground (Desmon, 2000).
State Law and Stigmatized Property
The laws are written to protect primarily brokers and real estate agents who arguably might get caught in the middle. Many states cover only brokers and agents, and say nothing about protecting the seller. A few states, like my own state of Delaware, make some concession to a potential buyer. In these states a buyer can make written inquiry about any psychological stigmas. In most states that allow this provision the buyer or buyer’s broker can either answer or refuse to answer, which is a type of answer as well; the refusal to answer an inquiry is a sign of guilt on the seller’s part and thus some indication that there is a stigma that has not been disclosed. And several states with statutes that protect against disclosure do have a caveat that sellers and their agents cannot misrepresent a property, or in effect lie about a stigma. I have listed a few of the more interesting state laws directly below, just to give you a taste.
While many state stigmatized property statutes protect the brokers in a transaction, five states in particular shield only the broker from non-disclosure. Nevada and Texas protect brokers from disclosing deaths by HIV/AIDS and other types of death on the property, except when the death was caused by a condition on the property. Thus, if the roof came down and killed someone this would be an item to be disclosed. Missouri covers only real estate agents and brokers, failing to mention sellers at all.
A few states protect brokers and sellers from disclosing psychological impacts but do make allowance for a concerned buyer to at least make an inquiry about a property’s history. Delaware for instance allows for written inquiry to be made. Should an owner receive such a written inquiry about crimes or deaths on a property they are directed by law to answer honestly. Tellingly, Delaware law protects only agents from nondisclosure, but makes no mention as to a seller’s protection for failure to disclose stigmas. Connecticut, Georgia and New York have similar processes, but allow for a seller to answer or refuse to answer an inquiry. The thought behind such laws is that a seller’s refusal to answer a direct question is in itself an admittance to a psychological stigma on the property.
Indiana, Ohio, Rhode Island and South Carolina
Caught in the Cross Hairs: Real Estate Agents and Stigmatized Property Laws
“The immediate response of the real estate agent was, ‘Oh, you don’t want that house….Take my word for it honey, you don’t want that house.’” This excerpt from Mark Spencer’s book A Haunted Love Story, Ghosts of the Allen House chronicle the odd behavior of an agent when he and his wife enquired about purchasing an old home. New to the neighborhood, the couple couldn’t figure out why the agent was so reluctant to sell them a house. They found out later, from neighbors, about the home’s ghostly reputation.
Quick definition of Legal Terms used Below.
Causes of Action: Are a set of facts sufficient enough to justifiably allow a party to sue to gain money, property, or action against another party. A plaintiff (the wronged individual) can bring about a suit in court for a breach of contract, for example.
Caveat Emptor: Latin for buyer beware. Before the 1980’s it was assumed that a careful buyer could glean enough information about a property with an inspection on the premises.
Disclose or disclosure: The act of revealing something otherwise unknown or secret. Written information about a property that is given to a potential buyer.
Material Fact: In real estate transactions a material fact is a fact that if known might have made the buyer make a different decision whether to stay in an agreement or reduce the amount paid for a property. For example if a property was on a flood plain and had a history of flooding, as a potential buyer you would expect to be told this fact. And it would probably factor into the amount you offered or whether made an offer at all, flood insurance being what it is. Most states have disclosure laws where material facts (information against the property) is required to be disclosed to a potential buyer. If disclosure does not occur then a buyer can take an agent or seller to court, or pull out of a deal altogether.
Rescission is the cancellation of a contract. Such cancellations can be one-sided, as when a single party cancels a contract because of a breach of contract by the other party. Rescission can also occur when both parties mutually agree to cancel a contract and discharge any and all remaining obligations.
Sellers the person or persons who own the property and are selling it.
Sellers’ Agents Anyone with whom the seller contracts in order to complete the sale of a property, usually just the listing real estate agent.
Buyer’s Agent The real estate agent or broker that is working with the party that is buying the property.
Arizona is no friend to buyers of stigmatized property. Arizona amended the statute in 1996 which protected only sellers’ agents. The amended law now includes any “licensee which acts on behalf of a seller”, thus also including the buyer’s agent as well. The law prevents causes of action against agents and sellers for failure to disclose psychological stigmas against a property including failing to disclose homicide, felony, suicide or natural death on a property. HIV and AIDS or other diseases not likely communicable by occupancy. Further, the law prohibits rescission of a sale for failure to disclose. In other words, buyers cannot request a nullification or cancellation for later learning that a property has a psychological stigma attached (Brown, Thurlow, 1996)(ARIZ. REV. STAT. ANN. § 32-2156(A)(1)).
Georgia protects against causes of action against sellers or sellers’ agents for failure to disclose stigmas which it lists in the statute’s subsections. HIV/AIDS and other types of communicable diseases not felt easily transferred by occupancy are nondisclosure items as well as stigmatizing crimes such as murder, suicide or other felonies.
Like Florida, Kentucky’s statute concerns itself only with former occupants with HIV/AIDS. Kentucky law states that such illness is not a material fact and thus does not affect the value of a property. Therefore there is no requirement to disclose such information. The law also protects sellers and sellers’ agents and buyers’ agents against causes of action (KY. REV. STAT. ANN § 207.250(1)).
Massachusetts is a caveat emptor state, a fancy way of saying buyer beware. And if you’re buying in Massachusetts you better beware, because according to the state statutes brokers and sellers are not legally required to inform perspective buyers of suicides, homicides, felonies or alleged paranormal activity (Vetstein). They are also not required to inform a potential buyer of illnesses of former occupants such as HIV or AIDS or any other illnesses that are not considered easily transmittable by occupancy (Massachusetts General Laws Chapter 93, section 114).
The law goes on to state, “…No cause of action shall arise or be maintained against a seller or lessor of real property or a real estate broker or salesman, by statute or at common law, for failure to disclose to a buyer or tenant the real property is or was psychologically impacted (MASS. ANN. LAWS ch. 93, § 114).
Nevada law is interesting for a couple of different provisions it makes. Nevada has all the usual wording; dividing the psychological impacts into two neat categories disease/AIDS/HIV and Death/Suicide/Felony stigmas. However, Nevada also lists death by any cause making it only one of four states to include death on a property by any means as a psychological stigma against the property. An exception in Nevada’s stigma law are deaths caused by a condition of the property (NEV. REV. STAT. § Subsection 44.770(1)).
Sellers and sellers’ agents are exempt from causes of action for failure to disclose. A sub-section also provides protection to the buyer’s agent unless “otherwise provided in an agreement between a buyer and his agent [my emphasis] (44.770(3)).” Nevada’s law makers undoubtedly felt that it was only a very sophisticated or an extremely nervous buyer that would demand such an agreement beforehand. It is also highly unlikely that the buyer’s agent would suggest signing such an agreement before entering into an agreement with a buyer (NEV. REV. STAT. § Subsection 44.770(1)).
Tennessee covers sellers and real estate agents in their statute, all whom they say are protected from causes of action for failure to disclose psychological stigmas. Tennessee considers HIV/AIDS or other diseases not easily transmitted by occupancy under their stigma law. The law further defines psychological impact as “(1) an act or occurrence which had no effect on the physical structure of the real property, its physical environment or the improvements located thereon (2) [a] homicide, felony or suicide (Thurlow, 1996)(TENN. CODE ANN. § 66-5-207).”
The state of Texas made provision for psychologically impacted property in their real estate law. Protected from disclosure under the law are people who have contracted HIV/AIDS while occupying the property. The law also covers death that occurred on the property through natural causes, suicide, or deaths caused by accident on the property not caused by the condition of the property. Texas’s law makes the curious statement regarding agents listed as brokers, salespersons and sellers; remonstrating them that an agent really has no “duty to inquire about or disclose” psychological stigmas listed under the statute. The interesting admission appears to be written in order to protect buyer’s agents in particular, who are after all working on behalf of the buyer and thus working in their interests (TEX. REV. CIV. STAT. ANN. Art. 6573a § 15E).
Wisconsin’s statute comes out swinging with a warning to real estate agents, brokers and salespeople that they must not disclose any information that would constitute discrimination under the Fair Housing Act. Thus previous occupants with AIDS/HIV have their privacy protected by the statute. The law continues that agents are not liable for failure to disclose anything that does not affect the physical condition of the real property. The statute then goes on to state that real estate agents also need not disclose any nearby “adult family home” which seems to be a bizarre addition to the law. Why lawmakers felt a nearby nursing or adult home would or could affect the market price of a property is anyone’s guess (WIS. STAT. ANN 452.23(2) (a)).
2. Arkansas ARK. CODE ANN. § 17-10-101 (Supp. 2009).
3. California CAL. CIV. CODE § 1710.2(a), which initially protected nondisclosure only of an occupant’s HIV/AIDS status, was enacted in 1986.
4. Colorado COLO. REV. STAT. § 38-35.5-101 (2009).
5. Connecticut CONN. GEN. STAT. ANN. § 20-329ee (West 2008). ANN. § 20-329dd
6. Delaware DEL. CODE ANN. tit. 24, § 2930 (2005).
7. District of Columbia D.C. CODE ANN. § 47-2853.198 (LexisNexis 2007),
8. Florida FLA. STAT. ANN. § 689.25 (West 2008)
9. Georgia GA. CODE ANN. § 44-1-16(a) (1)(B) (Supp. 2009).
10. Hawaii HAW. REV. STAT. ANN. § 508D-8 (LexisNexis 2006).S.B. 3266, 18th Leg. Reg. Sess. (Haw. 1996
11. Idaho ID 38 IDAHO L. REV. 251 (2001).
12. Indiana IND. CODE § 24-4.6-2.1-2(1) (1995);
13. Kentucky KY. REV. STAT. ANN. § 207.250 (LexisNexis 2007).)
14. Louisiana LA. REV. STAT. ANN. § 37:1468 (2007).
15. Maryland MD. CODE ANN., REAL PROP. § 2-120& amp;. MD. CODE ANN. Bus. Occ. & PROF. § 17-22.1(a)(2)
16. Massachusetts MASS. ANN. LAWS ch. 93, § 114 (LexisNexis 2005).
17. Michigan MICH. COMP. LAWS § 339.2518(a) 1996.
18. Mississippi MISS. CODE ANN. § 89-1-527 (1999)
19. Missouri MO. ANN. STAT. § 442.600 (West 2000). § 442.606
20. Nevada NEV. REV. STAT. ANN. § 40.770(1)(b) (LexisNexis Supp. 2006).
21. New Hampshire N.H. REV. STAT. ANN. § 477:4-e (2001).
22. New Mexico N.M. STAT. ANN. § 47-13-2 (LexisNexis 1995).
23. North Carolina N.C. GEN. STAT. § 39-50 (Supp. 1995);
24. New York N.Y. REAL PROP. LAW§ 443a(1); NY 572 N.Y.S.2d 672 (N.Y. App. Div. 1991).
25. Ohio Ohio's Homeowner Disclosure Law, 45 Case W. RES. L. REV. 1149, 1180-82 (1995); Ohio revised Code Section 5302.30: Real Property Transferor Disclosure
26. Oklahoma OKLA. STAT. § 858-513(c)
27. Oregon OR. REV. STAT. § 93.275 (2009).
28. New Mexico N.M. STAT. ANN. § 47-13-2(B) (LexisNexis 1995).
29. Rhode Island R.I. GEN. LAWS § 5-20.8-6 (2004).
30. South Carollina S.C. CODE ANN. § 27-50-90 (2007). S.C. CODE ANN. § 40- 57-270(A)
31. South Dakota
32. Tennessee TENN. CODE ANN. §66-5-207 (19996)
33. Texas TEX. REV. CIV. STAT. ANN. art. 6573a, §15E(2) (Vest 1996
34. Utah UTAH CODE ANN. §. 57-1-37 (1994).
35 Virginia VA. CODE ANN. § 55-524(A)
36. Wisconsin WIS. STAT. ANN. § 452.23(2)(a)(West Supp. 1996).
Anonymous (2008) Baylor Survey Finds New Perspectives On U.S. Religious Landscape Baylor College of Arts and Sciences. Retrieved September 4, 2013 from www.baylore.edu/artsandsciences/index.php?id=59330
Desmon, Stephanie (2000). “Couple who says their lot contains graves can sue. Appeals court allows action vs. developer” The Baltimore Sun.
Edmiston, Stuart C., Senior Editor (2011) “Secrets worth Keeping; Toward a Principled Basis for Stigmatized Property Disclosure Statutes. UCLA Law Review, Volume 58.