Do you dare disclose if there's been murder or mayhem at your listing? What if the owner was a controversial person? What are the professional and logistical challenges if there is a well-publicized ghost on your next property? What we are talking about is stigmatized property!
What is stigmatized property?
Think of what the word "stigma" means: a mark of disgrace associated with a particular circumstance, quality, or person. If you remember that, then it is easy to understand what a stigmatized property is.
Check your local jurisdiction for the local rules regarding this, but as a general rule, the rule "caveat emptor" applies, which is Latin for "let the buyer beware". Simply put, the seller is not liable.
The main exception to this rule is where the seller makes a "misrepresentation", or lies, about an aspect of the house. A seller has a duty to reply truthfully about important facts, and in a manner not aimed at misleading the buyer. Even silence or evasive answers can constitute a misrepresentation if an average buyer would have been misled. Be sure to watch the videos about the different types of fraud.
Ultimately, a seller should use common sense and disclose information that materially affects the price of the property, and that the buyer wouldn’t have been expected to ask about.
Therefore when asking which stigmas the seller has the duty to disclose, ask yourself if the stigma can affect the value of the property.
These stigmas can include, but are not limited to:
1. Phenomena: This is the one people usually think of when they think of a stigmatized property. Hauntings, ghost sightings, and other unexplained events which could affect the value of the property must be disclosed.
2. Murder/Suicide: Some states require that murders and suicides that took place on the property be disclosed to buyers. Many of these laws have a time limit. For example, California requires that the deaths be disclosed if they took place within the last three years.
3. Other Criminal Activity: Most states require that criminal activity be disclosed, such as drug dealing or prostitution.
4. Debt: Some states require that outstanding debt from the previous owner be disclosed so that buyers can be forewarned about harassing calls and visits from creditors.
5. Public Stigma: This is relevant when a stigma is known to a wide selection of the population and any reasonable person can be expected to know of it. An example could be the home of the Menendez brothers.
Still unsure whether you need to disclose a defect? As a general rule, the more you disclose, the better it is for everybody.