“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.”
You hold your breath as the woman on the screen turns and…sees the apparition with the bulging eyes and green skin. Her clothing in tatters and her hair standing on end, she reaches, reaches for you. You shut your eyes and shudder in delight. For many of us the thrill of a haunted house is a wonderful indulgence into the macabre. We love to be titillated by television shows and movies about the unknown, because it’s a controlled environment. You know when the creepy music begins someone’s going to get it, and you know when it’s over you’ll be turning off the set and heading to the safety of your own bed. But while many of us enjoy watching shows about hauntings on TV, most of us would rather not live in a haunted location ourselves.
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)?
Following two landmark cases in the 1980’s and 90’s states got busy writing statutes in knee jerk reactions, to prevent themselves being caught in the middle of messy property disputes. Prior to this time sellers and their agents didn’t consider it necessary to disclose psychological impacts working under the premise of caveat emptor or buyer beware, believing that anything about a property that needed to be known should be discoverable by a savvy buyer conducting an inspection of a property. But the premise of caveat emptor was slowly being eroded by judicial decisions which appeared to be favoring buyers who felt they had the shroud pulled over their eyes.
Reed vs. King
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
New York State’s Appellate Division of State Supreme Court faced a similarly shadowy situation in the Stambovsky v. Ackley case. Mr. Stambovsky, being an out-of-towner from New York City, agreed to purchase Ms. Ackley’s lovely waterfront home, a rambling historic Victorian on the shores of the Hudson River, for a whopping $650,000. He made good on his promise by placing a deposit of $32,000 down. Then he found out from a local architect that the house was haunted.
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).’”
The Burden of Owning a Stigmatized Property
So what if you’re a prospective home buyer? Do you have any legal right to find out if a property has an unsavory past or a ghost in the attic? For example would finding out if a murder, suicide, or felony occurred at an address make a difference in whether you purchased a home? What if someone simply passed away in the home? And what about the sticky prospect of alleged paranormal or supernatural occurrences? Having this type of history places a property in the category of a stigmatized property.
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
With Stambovsky vs. Ackley and Reed vs. King decisions weighing on their shoulders more than half the states quickly passed some type of stigmatized property laws. However, the laws they enacted materially serve and protect in particular the brokers and agents selling stigmatized properties from non-disclosure of psychological stigmas. Many states also include the sellers/owners of properties in an umbrella of protection.
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.
Apparently law makers do not realize that the vast majority of Americans (82% of the population) still profess to be Christian, and some 85-90% declare a belief in God or a higher power, according to two surveys conducted by the Baylor Institute for Studies of Religion (2005, 2008). God, Christ and the Holy Ghost, believing in something not of the flesh is in the organization’s slogan. Therefore, I’d disagree with lawmakers that nearly all of the populace is archaically superstitious, and just need to get over it. Edmiston does argue that while law makers take a hard stance against superstitious buyers, the courts have tended to support the buyers in certain landmark cases over the sellers who did not disclose.
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
Former Worcester County Commissioner, Louis Hickman, acquired a 200 acre farm in the 1960’s in Bishopville, which he intended to turn into 150 residential lots, known as Holiday Acres. Whether Hickman knew of the cemetery located on lot 96 when he procured the farm is unknown as Hickman passed away in 1997, before the case came to court. Of course it is interesting to note that it appears it was the graveyard where his own ancestors had been buried. According to court records, before selling lot 96 Hickman apparently used a bulldozer to remove the headstones of a family cemetery that included deceased members of the Hickman and Beauchamp families.
Tom and Deborah Carvens purchased the lot in 1986 they submitted their plans for a home to Louis Hickman who approved the building plans. Hickman never told the couple of the cemetery, and a recorded plat map No. 2 showed no cemetery.
The Carvens worked with a general contractor and performed much of the building of the house themselves. During construction, with the digging of a septic system or the laying of underground utility lines no suspicious bones were reportedly found. The couple also reportedly did extensive landscaping, putting in trees and shrubs without incident. Eventually one of Ms. Carven’s business associates informed her that her house was built on an old cemetery. Not long after, Ms. Carvens was digging out an old yucca plant and came across some bones and a metal handle which she took to be the handle off a casket.
Two county sheriff’s deputies found further bones in the same hole when called in to investigate. The Carvens admitted to a reporter that they were uncomfortable with the cemetery, and desired to move, but feared no one would buy the house. Instead they decided to take the case to court. They also admitted that they feared their house was haunted.
The case was tried under the Maryland State statute § 5-108(a) which precludes a cause of action for personal injury or injury to real or personal property that results from the defective and unsafe condition of an improvement or is over 20 years old (Findlaw). The Court determined that the cemetery did not in fact cause an unsafe condition and the case had exceeded the 20 year mark. Strictly interpreting § 5-108 the way its writers’ had intended meant that the Carvens would have had to been in some physical danger from the improvements, the roads, bridges, etc., that Hickman had paid to put in place, and a strict reading of the law indicated that the Carvens were not in fact in any physical danger from such unsafe conditions on the property.
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
So if you’re concerned about what the stigmatized property law is in your state I’ve enclosed a state by state break down. But to summarize briefly no state yet has proposed that psychological stigmas be disclosed to interested buyers. The majority of states agree that disclosure of psychological stigmas are not material fact and thus not necessary to disclose. What this means in layman’s terms is this, the seller and certainly not her agent are legally responsible to tell you about a stigma (moral obligations notwithstanding). Law makers have taken the hard tack that a stigma in no way detracts from the value of a real value of a property, the walls, roof or floors. If you buy a home and then later find out there is a psychological stigma you cannot file a cause of action – in other words demand a deposit back or annul a contract or sue them in a court of law.
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.
California’s disclosure law could be labeled death on a deadline. When buying in California, if a death occurred on a property within 3 years of selling the owner is responsible for disclosing the fact. After 3 years, however, all bets are off. Recall the appraiser that noted it took 15-30 years for the value of a stigmatized property to rally.
Illinois, Michigan, Montana, and Texas, Missouri
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.
Delaware, Connecticut, Georgia and New York
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
Several states make no provision for disclosure, but do add the caveat that sellers and agents cannot make a misrepresentation of facts. So in other words, if you ask and they lie you should be able to get out of the agreement. Ohio law in particular suggests that if a seller misrepresents a property’s history they are materially responsible for the financial hardship such misrepresentation caused.
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.
UCLA Law Review Senior Editor, Stuart C. Edmiston notes that many agents will disclose more about a property than the law requires out of a sense of fair play, as we see in this example. While real estate agents may not be required to make disclosure on stigmatized properties, many brokers apparently feel compelled to say something anyway. Many believe that maintaining a reputation of honesty and integrity outweighs the quick sale of an undesirable property. Or perhaps with the courts’ decisions leaning in favor of the duped buyer, agents feel cagey, caught in the middle of an unsustainable slippery slope (Edmiston, 2011).
What Is a Buyer to Do?; The Value of Nosy Neighbors
Edmiston goes on to say that if the agent says nothing, the neighbors certainly will. He notes several cases where a nosy neighbor informed buyers of a less than desirable property history. So if you’re looking at properties take the time and walk next door. Ask a few questions about the neighborhood and the house and you may glean more information than you thought possible. Real estate agents have also suggested that a buyer do a Google search of a property if they feel they have reason for worry. Between the two approaches hopefully you’d find out what you needed to know before signing on the dreaded dotted line.
Below is a state-by-state breakdown of stigmatized property statutes, and a quick guide of legal terms that may help you make sense of them.
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 ha