Casper the Lonely Ghost: Buyers Don’t Want Haunted Houses

As intriguing as haunted houses are, they are not an easy sell.  Whether you believe in ghosts or not, this is the scary truth: if a home has had a murder, suicide, or illness take place in it, it is “psychologically impacted” and carries a supernatural stigma.  [1]  This fact alone may keep buyers away more than any of its physical characteristics.  [2]  According to a study done by professors at Wright State University, psychologically impacted houses take 50% longer to sell than homes with comparable features.  [3]  On top of that, they price at an average of 2.4% less than those that do not come with a supernatural tenant.  [4] And since apparitions are not always readily apparent to the prospective buyer, sellers with stigmatized property are faced with the temptation to keep their ghosts a secret.  Legally though, it may not be in their best interests to do so.

Potential buyers turn away from stigmatized properties for a number of reasons, including concerns about bad luck or ghosts. [5] According to Park Dietz, a forensic psychiatrist, many buyers are also concerned that purchasing a house that has experienced such a tragedy leaves an imprint on the homeowner’s consciousness and impedes on his ability to enjoy his home. [6] Because of concerns like these, the condominium where Nicole Brown Simpson and friend Ronald Goldman were murdered sold for $200,000 less than the asking price. [7] Also, the property of the Heaven’s Gate cult where thirty-nine people committed suicide sold for less than half of its listing price. [8] The Heaven’s Gate house was demolished and the Simpson condo remodeled in attempts to retain any value of the property. [9]

Sometimes stigmas have the reverse effect on the sale price of a house. The publicity surrounding an event and the deceased’s status in the community could make a price skyrocket. [10] For instance, Gianni Versace was gunned down outside his 20,000 square-foot mansion in 1997. [11] The home was purchased three years later for $19 million, which at the time was the highest price paid for a house in Miami-Dade County. [12]

For the most part, though, purchases of stigmatized properties do not turn into gold mine investments. Thus, if potential purchasers fail to ask about deaths in the home prior to closing, they run the risk of buyer’s regret. In 2005, a New York couple purchased a condominium without asking about any deaths having occurred on the property, only to disturbingly find out after purchase that the last owner committed suicide there. [13] Because New York is an example of a state where sellers and real estate agents may withhold information about deaths or hauntings, the couple was left with no legal recourse. [14] It is reported, however, that most sellers and real estate agents in New York will disclose the information if probed. [15]

Other states deal with these issues in different ways. California, for instance, requires sellers to disclose a death that occurred on the property if it occurred less than three years before the sale. [16] Going the extra mile, the California Association of Realtors advises agents “to disclose any death, no matter how long ago it occurred, if the seller asks” so as to avoid any potential for liability to the buyer. [17] Even though there is no California law requiring disclosure upon inquiry by the purchaser, it is probably within the seller’s best interest to follow the Association’s advice when considering another New York case. [18]

Famously in a New York Supreme Court case, Justice Israel Rubin of the Appellate Division declared that a house was haunted “as a matter of law”, because the defendant-sellers had widely publicized the allegations that their house was haunted. [19] Although the defendant-sellers in this case were under no legal duty to disclose the stigma on the property to any ignorant purchasers, the court was persuaded by the principles of equity to grant the plaintiff-buyer the opportunity to seek rescission of the contract of sale and recovery of his down payment. [20] Because the stigma on the property was “created by the seller” and “materially impair[ed] the value of the contract”, the court found that “nondisclosure [of the stigma constituted] a basis for rescission as a matter of equity.” [21]

Therefore, regardless of how strict the disclosure laws are in a state, potential buyers should always include in their inquiries regarding leaky faucets and noisy neighbors, whether there was a death on the property that will keep the buyer from sleeping peacefully at night.

It is a difficult line for state legislatures and courts to draw as to how much disclosure should be required of sellers and real estate agents. California setting up a time frame of three-year-old deaths to be disclosed is arbitrary at best when considering the concerns buyers have about stigmatized properties have little to do with how recent a murder or crime was and everything to do with their peace of mind. However, requiring disclosure also runs a risk of it becoming a slippery slope that detrimentally affects the ability of the sellers to close a deal when they must release information that does not necessarily deal with a property’s habitability. I think the happy medium here is for buyers to be held to the “Buyer, Beware” standard: sellers should be required to disclose known stigmas if they are probed by the buyers. If buyers are required to diligently research other information on a home before purchasing it, a property’s supernatural inhabitants should be one of them.

Sources

[1] Les Christie, Real Estate’s Scary Side, CNNmoney.com, Oct. 31, 2003, available at http://money.cnn.com/2003/10/21/pf/yourhome/househaunting/index.htm (last visited Sept. 26, 2007).

[2] Id.

[3] Id.

[4] Id.

[5] Stephanie Rosenbloom, Buyers Regret Not Asking: Anyone Die Here?, Realtor Magazine Online, May 3, 2006, available at http://www.realtor.org/rmodaily.nsf/pages/News2006050304?OpenDocument (last visited Sept. 26, 2007).

[6] Catherine Rampell, For Sale: Scene of a Crime, USAToday.com, Aug. 7, 2006, available at http://www.usatoday.com/news/nation/2006-08-06-murder-houses_x.htm (last visited Sept. 26, 2007).

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Rampell, supra note 6.

[13] Rosenbloom, supra note 5.

[14] Id.

[15] Id.

[16] Broderick Perkins, Do You See Dead People? Disclose It, REALTY TIMES, October 23, 2003, available at http://realtytimes.com/rtcpages/20031023_deadpeople.htm (last visited Sept. 30, 2007).

[17] Id.

[18] Id.

[19] Stambovsky v. Ackley, 572 N.Y.Supp.2d 672, 674 (N.Y. App. 1991).

[20] Id. at 675.

[21] Id. at 676.

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