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Realtors’ Duty of Disclosure on Stigmatized Properties

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For Sale by Ian Muttoo on Flickr

Photo by Ian Muttoo on Flickr

Recently in Waterloo, Illinois, the house of a horrific triple murder received just one bid at a foreclosure auction—from the bank that held the mortgage.

About a year ago in the upstairs of the suburban lakeside home, Christopher Coleman strangled his wife and two young sons. The marked lack of interest in buying the house probably had a lot to do with had happened there, but if you were looking for a home in that area and didn’t happen to have heard the news story, would you have even known about the murder?

Maybe, but maybe not. Not all states require that sellers disclose information such as whether a murder or suicide has recently taken place in a property.

Stigmatized Properties

To realtors, properties where a murder, suicide, or rumored paranormal activity has taken place are known as “stigmatized properties.” State laws vary greatly on whether sellers have a duty to disclose such information about such defects of a property, but according to Realtor Mag, even in the states who do impose a duty on sellers, “what constitutes a stigma varies.”

Realtor Mag goes one step further and urges disclosure even if state law doesn’t technically require it:

After you’ve confirmed that the reasons for a stigma are factual, ask yourself if knowledge of the stigma would affect the willingness of a reasonable person to buy the property or would change the amount that person was willing to pay. Stigmas aren’t always easy to classify, so use your best judgment.

Still, as a buyer, it never hurts to ask, so if you’re in the market for property, and it would freak you out to live in a house where a murder, suicide, or paranormal activity has occurred, you might want to add “stigmas” to your list of questions about the house.

What do you think? Should realtors have a duty to disclose information on stigmatized properties? Do you have any personal experience with this issue?

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June 1st, 2010 at 2:18 pm

Posted in Real Estate

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