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The Crusaders... John Reilly, Saul Klein, Mike Barnett
Best of RealTalk #2 Listing and Selling Stigmatized Properties

Welcome to the “Best of RealTalk”

RealTalk is the premier national online discussion forum (List Serv) for real estate professionals.  The Best of RealTalk is a hand-picked selection of practical tips and commentary from our subscribers who are willing and excited about sharing with other real estate professionals around the world. Over 3000 real estate practitioners subscribe to Realtalk.  For your FREE subscription, send a subscribe message to Realtalk@InternetCrusade.com. The topic this month is marketing.

In this issue of “Best of RealTalk":

  1. Listing and Selling Stigmatized Properties


A recent RealTalk discussion thread centered on agents’ experience in the disclosure and sale of what have been referred to as “stigmatized properties.” State laws vary on their requirements to disclose material facts (a material fact is usually defined as any fact which would influence a buyer’s decision to buy or not to buy a property) but usually, more disclosure is better than less disclosure. Properties that have been the scene of murders, mass murders, suicides…and ghosts typically fall into the category of “stigmatized properties.”

If neighbors tell the listing broker that there are Ghosts occupying the listed property, is that a material “fact” that must be disclosed to prospective purchasers? One thing for sure: if you are sitting an Open House and you see a Ghost, we recommend you disclose it ;-)

Join us now in our international discussion on disclosure and stigmatized properties.

Dave Matuszak started the ball rolling with this question posed to fellow Realtalkers:

“This is my first message. I recently listed a property where a suicide took place. Our legal hot line suggested we disclose the fact on the seller's condition report. What do you think?”

Sharing her personal experience was Ann Cummings http://www.AnnCummings.com:.

“I, too, had listed a property awhile back where the seller had committed suicide. It is not required by our state to disclose this, however, I made the decision to disclose it when I could sense during a showing that the buyer had real interest in the property. I did not feel it necessary to disclose it if I could tell the buyer had no interest in the property. This was an especially touchy listing for me, as the seller was also a long time friend of mine, so I was dealing with a number of issues on this particular property.

I did feel that it needed to be disclosed once I could determine that there was some interest, as this could have been something that would have affected whether a buyer would proceed on this property or not, and could potentially have an effect on that buyer's perceived value of the property. Being that this property was also in a neighborhood, the odds would be pretty good that if they didn't hear it from me, they would undoubtedly hear it from a neighbor, and I didn't relish the thought of having to appear in court because I withheld something like that.”

Wynne Achatz from Southeast Michigan http://SouthEastMichiganRealEstate.com had a similar experience:

“I speak from personal experience on this issue. Confer with your seller. Would they want to know before a neighbor came up and told them after they moved in? Convince the seller that it is best to disclose this "Upfront". Some buyers may have a real problem buying a house like that; others don't have any qualms about it. Better to have an informed happy buyer than one that tries to sue or spreads bad things about you because it wasn't disclosed. I have sold three homes in 22 years where suicide or murder had taken place. All cases were disclosed and all buyers bought anyway, and were happy with their purchase.”

Niel Thomas http://www.nielt.com from up north in Anchorage had these astute observations about disclosure requirements: .

I“In our community no law or regulation requires disclosure of stigmatizing facts. So the first question for you to answer is what the threshold legal requirement is in your jurisdiction. We have a supplemental disclosure form that asks owners to disclose drug-related crimes, murders and burglaries in the property (but not suicide). A draft of a new statewide form to be recommended to the Real Estate Commission would add these items.

Once you have the legal question answered, I think you have to consider the business traditions of your community. Talk to other brokers and see if there is a consensus in your jurisdiction about what is typically done. This is not an area where you will want to be a leader; it would be safer to accept the norms of the brokerage community where you do business.

In favor of disclosure is the idea that you will screen out people for whom the suicide (or other stigmatizing fact) is an issue. This would reduce the risk of a deal going sideways when the buyer finds out after the contract is signed. (And they will, you can be assured: neighbors love to tell.) Broker liability is an issue, too: a really angry buyer might decide to take it out on the broker, as well as the owner.

Against disclosure is the theory that the broker who comes forward with stigmatizing information against his client's wishes is failing his fiduciary responsibility to his client. By calling attention to the fact, the broker could be accused of encouraging the marketplace to discount the property's value by appearing to take the issue seriously.

My own opinion is that the market is a bigger force than brokers and owners can control. Some markets will discount value for some reasons and not for others. The amount of discount will vary from one community to another, again because community values vary. Finally, the facts and circumstances of the events in question are different in every case, which affects the degree of market discount that might apply. All this, in my view, points to biting the bullet and convincing the owner to make the disclosure, on the weed-them-out-first theory. If I'm really concerned about liability, because of the facts and circumstances, and the owner is unconvinced, I guess I would question whether I want the assignment.”

Niel then added:

“As a personal note, my brother-in-law committed suicide at the far end of the 2.5 acre parcel where his house was. He did it a month after my sister-in-law was killed in a car crash two miles down the road. The event happened nine years ago. My wife and I inherited the house and still live there. If we were to sell, is this a subject for disclosure? The point, I believe, is that there are degrees of seriousness that invite using some judgment in the context of community and cultural norms.”

Jim Lee in Knoxville, TN http://www.KnoxvilleMLS.com writes:

“Even though I don't believe there is a legal requirement to disclose that fact, I do believe you should. I guarantee you that if you don't the neighbors will as soon as they move in or before, and then you look like you're trying to hide something or put one over on them.”

In some cultures, the fact that death occurred on the property is a material fact….this is a good reason buyer brokers should ask their buyers if they should be asking the seller or listing agent direct questions about death on the property.

Margaret J Norrie http://www.allmaui.com from Maui points out this culture issue:

“Yes, Dave. Like Jim Lee, I would definitely advise that event, or any equivalent event (murder?) should be disclosed. Apart from anything else, there are those whose cultures and/or beliefs would never allow them to purchase a property where such an event had taken place; or, at the very least, without some form of exorcism. A few years ago we had a condominium unit in escrow. The unfortunate tenant was murdered in her bed in the unit. The Asian buyers canceled the escrow. In the State of Hawaii this is a required disclosure within a certain time frame of the happening. You might investigate whether a time frame also applies in your State.”

Steele Propp http://www.homebuyers-minneapolis.com confirmed the cultural aspect:

“In working with the Chinese, I found that any death in the property was unacceptable. Even if someone had died in their sleep 100 years ago. My understanding is that with ancestor worship, you don't want anyone else's ancestors.”

Curt Hardee, a seasoned instructor from Fayetteville, North Carolina, reminds us that we must bring the seller into the picture when it comes to disclosure of stigmatized property issues:

“The only thing I haven't seen discussed is the owner. Even if your state (as mine) does not require disclosure (unless asked), then the agent cannot be the decision maker as to whether or not to disclose. If the agent feels strongly about it, and the owner doesn't want to discuss (even after sage advice), then the agent should not take the listing.”

And, our lawyer friend from north of the border in Ontario, Mervin Burgard, Q.C., introduces the Code of Ethics application:

“A Seller may or may not have to disclose deaths and other "stigmas" based on whether you are in a common law jurisdiction or have a state or provincial statute dealing with the issue. A Realtor with a Code of Ethics may have a higher obligation. For a debate/discussion in Ontario look at "Realtor Edge" at http://www.orea.com/edgenewssept99.ht.



That’s it for this month. If you have a particular topic you would like discussed or question you would like to see answered, send an eMail to: RealTalk@InternetCrusade.com



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