What Is a Stigmatized Property?
A stigmatized property is a property that comes with certain factors that aren’t necessarily appealing to buyers and that lower its value. This doesn’t mean issues with the actual structure of the property, the title is used to describe properties where people have committed suicide, passed away in a way that was not natural, or properties that were crime scenes at one point. This also means properties that were once used for illegal drug activity or those that are considered haunted. It is important to note that even if a property is just in an area that witnessed criminal activity, it can be stigmatized, even though the event did not happen in the home.
All About Stigmatized Properties
This type of property is one that has been “psychologically impacted.” The National Association of Realtors does not pinpoint exactly which instances need to be disclosed to buyers due to the fact that every state has its own stance on the matter. If a home was the scene of a murder or a suicide, the event will stigmatize the property. This also includes deaths as a result of domestic or child abuse.
Natural deaths, such as a heart attack or old age do not count. Also, there is more than just death that could stigmatize a property. Drug activity and nearby sex offenders could stigmatize a property as well. There is a law called Megan’s Law that requires US authorities to disclose information regarding sex offenders to the public. The law was created as a result of the rape and murder of seven-year-old Megan Kanka who was victimized by her neighbor. Other stigmas include minimal stigmas and debt stigmas. Minimal stigmas include instances that are unfavorable but not criminal. For example, if the property was popular for having explicit parties and gatherings, this would be considered a minimal stigma. Also, in Megan Kanka’s case, having a neighbor who was a sex offender fell under the category of a minimal stigma. If you are selling a property, it is a good idea to inform people of this. If you are purchasing a property, you might not care to know this information and you can decide not to. A debt stigma is one that happens when the previous owner owes a high debt to collection agencies and creditors are always coming to the property in an attempt to recover the debt. The new owner can fix this pretty easily though by simply reaching out to let them know that the person they are looking for no longer lives there. There are also public stigmas; this means that whatever happened in or around the home is a well-known event and therefore recognizable by many. These must be disclosed by the buyer before closing.
Rules Around Disclosure
Each state has its own laws when it comes to disclosing stigmas on properties, however, the majority of them agree that the seller only needs to disclose the information in it can be categorized as a material fact. A material fact is one that would potentially alter the buyer’s choice to purchase the home. However, what could be considered a material fact is largely subjective and dependent on each individual buyer. Something that might seem significant to one person might not matter at all to another. In some states, deaths must be disclosed to new owners, particularly if they were the result of an incident that was the fault of the property (structural issues, etc.). Violent deaths must be disclosed in most states, however, in California, sellers must only disclose deaths that happened within the last three years. The majority of states do not require sellers to disclose crime in or around said property or suspicions of the paranormal. Real estate agents should be honest with you if you ask a question and should not go out of their way to hide something that should be revealed to a buyer. The fact that many states only require sellers to disclose certain information if it can be labeled as a material fact can bring up some issues since a seller could easily neglect to inform a buyer of something because they simply do not think it is material. If the buyer closes on the property and uncovers a stigma that they don’t like, they would be very unhappy. Stigmatized properties aren’t all bad, however, it is a good idea to do your own research as a buyer to ensure there are no surprises.