Understanding Stigmatized Properties
Picture this. You’ve just purchased the home of your dreams and are moving in, and the neighbors begin stopping by to welcome you to town. It all seems so very normal and great until one neighbor begins talking about the history of your new home. Maybe there are rumors of paranormal activity; or someone died in the house; or it has been the site of ongoing police activity over the years and there is plenty of speculation around the block about why. Regardless of the story, you wonder how you were not notified of the issue prior to purchasing the home.
This is a case of a stigmatized property and as is true in many states, sellers of real estate in Colorado are generally not required to disclose facts to a prospective buyer that may have a negative psychological impact.
Stigmatizations may include things like suicide, murder or death of any nature, hauntings or paranormal activity or notorious previous owners.
According to Randall Bell, an appraiser who has been called in to help with valuations at some of the most talked about crime sites in the nation, an infamous crime or murder can result in a loss of value between 10 and 25 percent. Bell was the appraiser consultant for the Jon Benet Ramsey home as well as the condo of Nicole Brown Simpson.
And the stigmatization does not have be of the sinister kind. Famous homes in television and movies – think the McCallister house from “Home Alone” – can also carry a stigma when they go up for sale due to unwanted streams of traffic from those wanting to get a glimpse of the site.
Sellers of homes that may carry a stigma should consult with their real estate professional about disclosure up front. Violent crimes will negatively impact a property in value and potentially time on market while paranormal activity is more subjective.
On the flip side, buyers of stigmatized properties may be able to negotiate a better deal if they know about the issue up front. However, properties that were used for criminal activity such as drug dealing or illegal gambling may not seem like a big deal until you think about the former clients “stopping by” because they don’t know there are new owners.
So how do you find out if a property is stigmatized? There could be a disclosure by the seller but it is not required in the state of Colorado. An online search of the complete address will likely serve up anything that was newsworthy such as activity involving law enforcement. Keep in mind that news organizations do not report suicides, as a general rule. And there are websites devoted to marketing stigmatized properties and some are even sorted by theme like “Haunted Houses for Sale.”
