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Things Buyers and Sellers Should Know About Stigmatized Properties

By Bill Gassett | December 15, 2022

When you are searching for your next home, you’ll want to make sure the home and neighborhood are right for you, but should you also be concerned about the property's history?

If you aren't careful when choosing your next home, you could buy a stigmatized property. But what are stigmatized properties, and what do you need to know about them?

Real Estate agents and home sellers need to be well educated on the procedures in their state for disclosure. Disclosure laws vary tremendously from state to state.

Some things you may assume need to be disclosed are not. Here are three examples of what home sellers are likely not required to disclose.

If you're a buyer understanding the disclosure laws is also essential, as it will give you insight if further research is required.

Things to Know About Stigmatized Property
What Should I Know About Stigmatized Properties When Buying or Selling?

What are Stigmatized Houses?

A home is considered to be stigmatized when something happened or was suspected of happening inside the property. While the home is unlikely to have any physical defects relating to the reason for the stigma, people’s opinions could be very negative.

In fact, the home could be in fantastic condition, but depending on the stigma, potential buyers could be hard to find. Many people won’t want to live in a home where something terrible has happened, even if it doesn’t physically affect the home.

There are many reasons why a home could be stigmatized. Perhaps the previous residents were involved in criminal activity, or a murder was committed at the home. It could even be something like reports of paranormal activity that cause the property to be stigmatized.

Stigmatized properties can represent an opportunity to buy a home for below market value, just as long as you aren't concerned about the stigma involved.

Stigmatized Homes can be Very Different

Not all stigmatized homes will be seen the same way by prospective buyers. Many potential buyers won't be bothered about a haunted home, but if there has been a murder, it may be more challenging to sell the home.

Haunted properties

Paranormal activity worries some buyers, though others might be attracted to this type of property. This type of stigma, however, isn't considered a material fact and doesn't need to be disclosed by the seller.

Some suspected haunted homes become abandoned properties. The owners will get to a point where they can no longer handle what is happening in the home, pack their bags, and leave.

Death in the home

When someone has died from natural causes, this doesn't typically create a stigmatized home. But murder, and suicide, certainly do. If a body was undiscovered in the property, it could create even more significant stigmatization for the current owner.

Criminal activity

If the property had previously been used to sell drugs or for prostitution, there will be a stigma about the home. The new owner might find that they sometimes get visitors who still think the property is used for these activities. Insurance will likely be more expensive with a home like this.

Sex offenders

If a sex offender has lived in the home previously or nearby, it can leave a stigma on the property. Locals might be aware an offender has lived in the house or one of the houses in the street, and potential buyers won't want to live next door to a sex offender.

You should check the home in the National Sex Offender Registry before buying.

Property Debts, Including Short Sales

If a previous resident of the home had trouble paying their debts, a new owner could face some consequences. They might have debt collectors arrive at their door, and if that happens, they can inform the collector that ownership has changed. The new owner could be responsible if the previous owner didn’t pay their property taxes.

Short sales are another stigmatized property type due to the owner needing bank approval to sell the house. It is required for short sales to be disclosed to potential home buyers.

Disclosures for Stigmatized Properties

Disclosure laws are not the same all over the country. In some places, like California and Alaska, the buyer will have to be informed about murders or suicides within the past 3 years. In Illinois, it is legally required to disclose if the home has been used to manufacture methamphetamine.

In other states, there may not be any requirements for the seller to disclose an issue like this with the home.

In Massachusetts, where I reside, there are no disclosure requirements for stigmatized properties.

Make sure you know what the state requirements for disclosures are where you are making a purchase.

Buying and Selling Stigmatized Homes

If there isn't a legal requirement to reveal details of the stigma relating to the home, you might only find out by asking the seller's agent.

If the home has an issue like this, it might not worry you, but it could mean it is harder to sell when that time comes. These stigmas tend to become less critical as the years pass, though if there was a high-profile murder, this problem could remain for a long time.

When you are selling a stigmatized house, it's usually better to be honest with your Realtor. They should be able to offer some advice to make selling your home easier.

Some people might like buying a stigmatized home, as they like the idea of their property having a history. Though it could also mean you have to price your home lower to attract a buyer.

Final Thoughts on Stigmatized Properties

Whether you are buying or selling a house, knowing the disclosure laws in your location is essential. If you're unsure, ask a real estate attorney or a real estate broker.

Attorneys and brokers are required to know the real estate disclosure laws.

Bill Gassett is an authority in the real estate industry with 38 years of experience. Bill is well respected for his informative articles for buyers, sellers, and fellow real estate agents to make sound decisions. His work has been featured on RIS Media, the National Association of Realtors, Inman News, Newsbreak, Credit Sesame, Realty Biz News, and his own authoritative resource, Maximum Real Estate Exposure. He has been on of the top RE/MAX agents in New England over the last two decades.
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