Stigmatized Property
Source:
Lee B. Harris,
krec.ky.gov
A "stigmatized property" is one that has a stigma based upon the happening of some event or some fact relevant to the property, such as murder, suicide, violent crime or the presence of ghosts. There is no specific law in Kentucky dealing with stigmatized properties; therefore, it is sometimes difficult for a seller and/or a seller's agent to know how to handle a potentially stigmatized listing.
Generally, any defect with a property must be disclosed under KRS 324.160(4)(b). The stigma could, in essence, become a "defect" that needs to be disclosed. The test, then, is not whether one of these events or facts has occurred but whether the property is in fact "stigmatized" because of it. In most cases, the property will likely not be stigmatized. What's more, most buyers will not care about the history of the property and will only be concerned about the structural or physical defects in the property. Nevertheless, you should still be cautious because there are some potential buyers who may care.
The trick is to determine whether there is a stigma that would affect a buyer's decision to buy. For example, you may be asked to list a house where a murder took place 25 years ago. In this particular neighborhood in this particular town, no one remembers this murder and no one ever talks about it. This house is probably not stigmatized. By the same token, you could be asked to list a different house where a murder took place 2 years ago. In this particular neighborhood in this particular town, the house is infamous for the violence that occurred there. Neighbors have been heard to remark that they would never live there because the house is too tainted by its history. This house may indeed be stigmatized.
Each listing has to be assessed on a case-by-case basis. There is no way to make a standard, across-the-board statement regarding stigmatized properties that would apply in all instances. The best I can do is to give you some rules of thumb that I advise licensees to go by.
If the crime or suicide has occurred recently (i.e., within one year) or if it is the very reason the seller is moving, you need to sit down and have a frank talk with the seller about disclosure. If you both agree on how to handle the issue, whether it is to disclose or not, then you can proceed accordingly.
If the seller tells you that the house is haunted - which is a very common occurrence - you need to have a similar conversation about stigma. Has the seller publicized to anyone who will listen that he lives in a haunted house? Has the house been on television at Halloween? Has the seller actually had an experience or an encounter with a ghost? This may sound frivolous, but there are actual cases involving haunted houses and we receive calls about this quite frequently. Some buyers do not believe in ghosts, so they will not be concerned about this issue. On the other hand, you may have a buyer who believes in ghosts and does not want to live in a house with them.
The fact of the matter is that the buyer will probably find out about any issues surrounding the property on the day he moves in. When the neighbors come over and say: "Isn't it horrible about the gruesome murder that happened in your new house?," how will the buyer feel? If the seller has disclosed, the buyer will answer politely and move on. If this is the first time the buyer has heard about any murder in his new home, he may start wondering what else was not disclosed about his new home.
There are also different issues to consider when dealing with a small town versus a large city. In a small town, most people will already know if something horrendous has occurred or if your listing is purported to be "haunted." In a large city, people may not know about the goings-on at a specific home unless it has recently been splashed across the front-page of the newspaper. You cannot assume even then that all potential buyers have seen the news.
What the licensee and the seller must discuss is how pertinent the revealed fact will be to the next owner. Always work on the assumption that the buyer will find out the first day he moves in, and you will probably come up with a solid solution to the question of disclosure.
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