A stigmatized property is a house, dwelling, or place of occupancy that buyers or tenants avoid for reasons unrelated to its physical features or condition. These include the death of an occupant, murder, suicide, ghost sightings, and more. As you can imagine, selling a stigmatized property can be a challenge.
In fact, according to a study from Wright State University, stigmatized homes stay on the market 45 days longer, and sell for 3% less than comparable houses.
Here is an overview of the 6 different types of stigmatized properties:
1. Murder or Suicide Stigma
This first kind of stigma is the biggest. Some jurisdictions in the United States require property sellers to reveal if murder or suicide occurred on the premises. For example, California state law requires disclosure if the event occurred within the previous three years. However, Florida state law doesn’t mandate disclosure at all. In North Carolina, sellers and agents do not have to volunteer information about the death of previous occupants on the property, but they have to answer a direct question truthfully.
Other states Like New York and California have more demanding stigmatized property disclosure laws. However, South Dakota and Alaska are the only states where the seller’s agent must report whether a suicide or a homicide occurred on the property within the last year.
2. Criminal Stigma
Criminal stigma results from occupants who have used the property in an ongoing commission of a crime. For example, if the former occupants have used the house as a drug den or a brothel, many jurisdictions consider the property stigmatized. Most states require disclosure of criminally stigmatized properties.
As long as there are no physical dangers from a criminal stigma, then many buyers will overlook the fact that a property was previously used for illicit activity.
3. Debt Stigma
This third kind of stigma is due to unpaid debts of a former occupant. Usually, collectors are not made aware that a debtor has moved out of a particular residence. Some states require disclosure of debt stigmatized properties.
4. Phenomena Stigma
This fourth kind of stigma is due to paranormal activity. Most jurisdictions require disclosure if a house is “haunted,” or if it is known for “ghost sightings.” Phenomena stigma is generally not taken very seriously by most buyers. However, listing a phenomena stigmatized property might lead to phone calls from thrill seekers or amateur ghost hunters instead of buyers. This more than ghosts or goblins is what will affect the value of the property.
5. Public Stigma
This last kind of stigma is known to almost everybody, and any reasonable person can be expected to know about it, like well-known homes used in films and TV productions. These properties are prone to increased traffic as a result of fans who want to visit the house. Public stigma always requires full disclosure.
6. Minimal Stigma
This kind of stigma is known to or taken seriously by only a small select group. As such, it is unlikely to affect the ability to sell the property. Real estate agents may decide to disclose this information on a case-by-case basis.
For example, while illnesses such as AIDS may cause a property to become stigmatized, the 1988 Fair Housing Amendment Act state that persons with HIV are considered handicapped and members of a protected class. In this case, the fact that an occupant of a property has AIDS does not require disclosure to a prospective buyer.
The Bottom Line
Stigmatized property is property that has become undesirable due to specific reasons not related to its physical features or condition. Sellers and agents are usually required by law to disclose these, but not always. Therefore, our advice to potential buyers is to heed the advice, caveat emptor — let the buyer beware.