WRITTEN BY JAYMI NACIRI POSTED ON WEDNESDAY, 12 JULY 2017 20:15
You call her Gladys. For the six years you lived in your charming little 1909 Craftsman home on your charming little 1909 street, she appeared in hallways. Open and shut doors. Moved things from one place to another. She was your friendly family ghost, and now you're moving. Can she be your little secret, especially since, while she freaked people out from time to time, for sure, you never felt unsafe?
The answer is: Maybe. It depends on if it's considered a "stigmatizing factor." Beyond the obvious things you would disclose about a home, like any known defects, repairs, and renovations, there are other other important factors that need to be disclosed per the National Association of Realtors, which defines stigmatized property as: "That which has been ‘psychologically impacted by an event, which occurred or was suspected to have occurred on the property, such event being one that has no physical impact of any kind," said HomeGuides. "Examples of stigmatizing factors include murder, suicide and other deaths, serious crime, proximity to registered sex offenders, hauntings and other paranormal activity. According to NAR, only 15 percent of potential homebuyers would pay full market value for a psychologically impacted home. A further 19 percent would expect a 31 to 50 percent discount."
Death in the house
Did someone die in the house while you were living there, or are you aware of a death in the house prior to your moving in? Whether or not you have to disclose this information will depend the state in which you live (different states, different laws) and the "type" of death we're talking about.
"Each state will have slightly different requirements for disclosure," says Jim Olenbush, a Texas real estate broker, on Investopedia. "In Texas, for example, deaths from natural causes, suicides, or accidents unrelated to the property do not have to be disclosed."
A murder in the home would typically have to be disclosed, however. The good news is that, depending on the type of murder and especially if it was especially gruesome or attached to a notorious crime, it might actually be a selling point. "Penny-pinchers are lured by the steep discounts," said Realtor.com. "Entrepreneurs see business opportunities. Some house hunters hope that they can transform the gory karma of these abodes. Others are true crime and haunted house junkies. And some buyers…are simply not perturbed by what happened, no matter how horrific."
Your financial situation
No, you don't need to include your bank balance and retirement accounts in your disclosures. But if someone has placed a lien on the property or if you're involved in bankruptcy proceedings, that information would be necessary.
A neighborhood kid who rides his bike past your house a couple times a day is no big deal (even if it drives you, and your dogs, crazy). One that is stalking your teenage daughter or playing loud music deep into the night, or a neighbor who is harassing you and/or has become outright dangerous, is another story.
"In the 1992 Alexander vs. McKnight case, the court held that sellers have to disclose their neighbor's ‘pattern of offensive and noxious activities,' including operation of noisy equipment, late-night basketball games, and a plethora of cars parked on the property, even if the conduct had stopped," said Silicon Valley, CA-based law firm Rossi, Hamerslough, Reischl, & Chuck. "Given the nature of the disclosure forms now required by both the state of California and many real estate groups, including the California Real Estate Association, the seller is required in many instances to be more than forthright with regard to prospective buyers. Full and complete disclosures must be made. If not, the buyer will move in, and one of the first things that will happen is that a neighbor will tell them about all of the problems, and then the buyer will sue the seller for failing to make complete and adequate disclosures. If you want to be rid of your bad neighbor problem, disclose, disclose, disclose!"
Reputable Realtors will generally recommend you disclose any repairs that were done to the home, beyond what may or may not be required on your disclosure sheet. "Be aware that buyers may be able to find out about the repair whether or not you tell them," said Realtor.com. "A home inspector may find evidence of the repair work, but another possibility is that the buyers may request that you provide a CLUE Home Seller's Disclosure report, which reveals all insurance claims on your property. If insurance helped pay for your leak and tub replacement, then that claim will stay on your report for up to seven years."
Hiding work that was done rarely pays off thanks to the sheer amount of available information today. And if problems arise with the home down the line due to issues you failed to disclose, you could be on the line. "Your disclosure can protect you from future disputes with the buyers since they will know about the issue before settlement. If you hide the repair work and the buyers later have an issue with moisture, mold, or another leak, then the buyers could potentially sue you for not disclosing something that could harm them."
You know when you're watching one of those renovation shows and the new owners want to tear down walls but then their contractor finds out there are layers of old lead-based paint underneath and now everyone has to vacate the premises while it's taken care of? That might make for great TV, but, in real life, the existence of lead-based paint absolutely needs to be disclosed.
"Lead paint is a mandatory disclosure in all states," said Maximum Exposure Real Estate. "If you fail to comply with lead paint disclosure requirements, the buyer can sue you for triple the amount of damages suffered. Accuracy on lead paint is one of the most important disclosures for any seller."
Paging Walter White! Good news if you have a Breaking Bad situation going on in your home for sale and you live in certain areas. This is another area where state-by-state disclosure laws vary greatly. According to Realtor.com, "Kansas doesn't require a seller to disclose if the home was previously the site of an illegal meth lab, while Missouri does."
Back to Gladys. The question when it comes to paranormal activity in a house is whether it falls under the umbrella of material facts. "Although the wording may vary state to state, most real estate laws require sellers to disclose ‘material facts' such as structural concerns, the age of the roof and shingles, leaks in the foundation and walls, existing mold and mildew, and total square footage," said LegalZoom. "Material facts can also include other items that affect the house's value such as the amount of property taxes, details about individuals who claim to have an interest in the house, or overlaps on adjacent properties."
Does haunting qualify? "In most areas of the country, a home seller would not need to disclose whether their home is haunted, but laws differ by state or even local ordinances," said Western Michigan University-Cooley Law School Professor Chris Trudeau on RISMedia.
But, that also depends on how "famous" the haunting is.
"In a famous 1991 New York case, a buyer sued the seller and the seller's Realtor for failure to disclose the house's ghostly reputation," said LegalZoom. "Prior to putting the house up for sale, the seller wrote about her bumps in the night for the local paper and Readers' Digest, but the buyers were unaware of the home's reputation. Although the court did not rule nondisclosure of the house's reputation as fraudulent, it did allow the buyer to back out of his contract and get his down payment back."