Stigmatized Property: What Sellers Need to Know

You may have an absolutely beautiful home that's in great shape—but if the property is stigmatized by something that's unrelated to its condition, you may still have a problem sealing a deal with a potential buyer.

What's a stigmatized property?

Generally speaking, a stigmatized property is one that a buyer might hesitate to purchase because of some issue unrelated to the actual structure of the building or property. Although others are possible, stigmas generally fall into a few basic categories, including the following:

  • Criminal: If the property was once a notorious brothel, was the home of a dangerous biker club, or was taken over by the state because it was a drug trafficker's house, that's a stigma.
  • Death: Natural deaths in a home don't generally leave it stigmatized, but a house that was the site of a murder or suicide (or both) can make buyers reluctant.
  • Hauntings: In many jurisdictions, a house that is allegedly or popularly believed to be haunted—like the Amityville Horror house or the Ackley house (which was part of a tour of local haunted houses)—the buyer has a right to know.

The legal criteria for what makes a property "stigmatized" varies from place to place. It can involve both state and local laws, so you want to discuss the issue carefully with a real estate attorney if you have any doubts about your property's status.

What about a property that doesn't fall into any of those categories?

Sometimes a property can be stigmatized by things that don't fit neatly into any obvious category. Take the case of a New Jersey mansion whose new occupants started receiving threatening, bizarre, and increasingly ghoulish letters from "The Watcher," who claimed he was taking over his duties from his father and his grandfather to spy on the house and its occupants.

The new owners quickly discovered that the sellers had also received a letter from "The Watcher"—although they claimed that they'd regarded it as a joke and it was only one. Ultimately, the sellers' lack of disclosure causes the issue to be brought up in court.

What's the bottom line on disclosures?

Basically, if you're a seller, you're under a legal obligation to disclose any possible defects that could affect the purchase price or sale of your home. This includes problems with the plumbing, a leak in the basement, lead paint, asbestos, and all the normal physical concerns. However, you're also probably under a legal obligation to disclose emotional defects, like the fact that the house was once a crime scene, the site of violent death, on the local "ghost walk," or just happens to be the subject of someone's deranged fascination.

Don't get yourself out from under a mortgage just to end up in litigation over a real estate deal gone bad. Talk to a real estate attorney instead.