What To Know About Stigmatized Properties

It’s the job of real estate professionals to tell the story of a home to help their clients make an informed decision. All homes have a unique history made up of those who lived there and the events that happened on site. Then there are those properties that have a reputation of having more drama than Selling Sunset.

Stigmatized property will sometimes be overlooked by home buyers in their search because of their reputation. But not all stigma was created equal, depending on your selling perspective, a stigmatized property might by the key to getting your client a great deal. Read on to learn more about working with stigmatized real estate.

A stigmatized property is real estate that has been psychologically impacted by an event that occurred or was suspected to have occurred there. For example, a home with a history of criminal or paranormal activity, could be considered stigmatized property. While these stigmas may not affect the physical condition of the home, stigma can make selling a home at market value a challenge depending on the type of stigma that exists.

When buying and selling real estate there are a few different types of stigmas you may come across while working in the field.

Here are some examples of common property stigmas:

Haunted Or Paranormal Activity Stigma

Most states do not require agents or sellers to disclose paranormal activity in a home. However, there are four states that specifically call out paranormal or haunted activity in their disclosure requirements, those states are New York, New Jersey, Massachusetts, and Minnesota. In those states, if a potential buyer asks if the home has experienced paranormal phenomenon, the agent and owner must answer truthfully.

If a seller expresses concerns with paranormal activity in their home, it’s a good idea to explore what could be causing the homeowner to believe their home is haunted. Big shifts in temperature from room to room could mean the home needs additional insulation. The bumps and thumps heard in the night could be a loose pipe in the wall that needs to be repaired or a pest that could be relocated.

Criminal Activity Stigma

There are a lot of reasons a client may not want to purchase a home known for criminal activity. The largest concern being any contamination or damage related to the criminal activity. If a listing has a checkered past take the time to research what really happened and what the sellers have done to remedy those issues to sell the home.

If you’re given the opportunity to list a property with an interesting rap sheet, take extra care to make sure the home the feels safe, well lit, and smells good. If there are broken windows, bullet holes, or biological contamination make sure those items are repaired and the home sanitized. By taking away the visual cues, those who tour the home won’t be reminded of the events that may have taken place in the past.

If you’re a buyer’s agent and you know your client will love the home but you’re hesitant because of its reputation, talk to your buyers. Oftentimes, these homes are in great condition and your client might not care about its history once they’ve seen the property in person.

Death Stigma

Death stigma is one of the most common types of stigmatized property real estate agents will deal with. Death disclosure requirements vary state to state for agents and sellers.

For example, in Florida, real estate agents and sellers do not have to disclose if there was a murder or suicide on the property. However, in California agents and sellers must disclose if a murder or suicide happened in the home in the last 3 years.

Do your research and discuss your findings with your client. Some home buyers don’t want anything to do with a stigmatized home. While other buyers may be able to overlook the home’s past and focus on the future they plan to create.

Debt Stigma

If a home’s previous owner had a significant amount of debt, home buyers may not want to be associated with that address because of regular visits by debt collectors and other unsavory characters. Be sure to check the property tax information and discuss any concerns you find with your client. If the homeowner left the home prior to paying their property taxes, the new homeowner may be responsible for past due taxes and liens attached to the property.

Sex Offender Stigma

A sex offender living on the same block can create a stigma for a home and the neighborhood its located in. If your client’s top priority is safety, consider looking up a home’s address on The National Sex Offender Registry and mention any red flags you may find.

Famous Homes Of TV And Film Stigma

For some people, living in an infamous house could be a real turn off. Fans taking selfies on the lawn and the added tourist traffic may make clients shy away from considering a house with notoriety. But for others, living in a home with a famous past could be the whimsy that will have them writing an offer before you leave the driveway.

For example, the actual loft from the show “New Girl” isn’t real but the building used for exterior filming is. The Binford Lofts were featured throughout the series and fans still stop to snap a pic in front of the iconic building, but the traffic hasn’t deterred buyers. In fact, the show increased interest in the building and made a positive impact on the neighborhood.

Disclosure requirements for real estate professionals and sellers vary by state. If you’re working with a listing that you feel is a stigmatized property, speak with your broker or contact your state licensing authority to clarify your state’s stigma disclosure requirements.

Some stigmas aren’t required to be disclosed on paper or in the MLS, many states simply require real estate agents and sellers to answer truthfully if asked about the existence of a stigma. For example, most states do not require a listing agent or seller to disclose whether a death has taken place on the property. But California requires agents and sellers to disclose if a death has occurred on the property in the last 3 years.

Many states have adopted a “buyer beware” policy when it comes to purchasing a home. This puts the responsibility on the buyer and buyer’s agent to do the proper research to ensure the home meets the client’s criteria and satisfaction.

If you’re faced with a challenging stigmatized property, don’t let its reputation intimidate you. Embrace the opportunity and do your research, you may find that the stigma doesn’t have to get in the way of you doing good business.

The following are some tips to help you prepare to put your best foot forward when working with stigmatized real estate.

• Understand the disclosure requirements in the state(s) you’re licensed in. Each state will have resources for licensed real estate agents and brokers to inquire about disclosure requirements and legal guidance to ensure they’re practicing real estate according to state guidelines. Take advantage of those resources when you have questions.
• Determine whether the information is fact or fiction. If the stigma is based on rumors or community perception, then there is no obligation to disclose. Things like here say and rumors are often easily dispelled with facts. 
• Determine the materiality of the stigma. Ask yourself if knowing about the stigma would affect a reasonable person’s opinion of the value of the home? If so, then you’ll need to address it with your client.
• Discuss the stigma with your client. If your seller client agrees to disclose the stigma then do so according to your state’s guidelines. If your seller refuses to disclose something you and your broker believe to be a material fact, you’ll want to tread lightly. Let your client know that you could be violation of your basic duty to disclose material information and that puts your license at risk. Make sure they understand that omitting material information from their seller’s disclosures could put the entire transaction at risk for failure.

Real estate professionals should approach disclosing property information with the care and sensitivity it deserves. When working with stigmatized real estate, its important for real estate agents and brokers to know how to evaluate facts and when to disclose that information during a real estate transaction. Once you’ve done the research, you can feel good knowing you’ve provided accurate facts for your client to make the right decision when faced with stigmatized property.

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