Real Estate Investing

When a property is for sale that may be stigmatized, the headaches may not end for the seller after closing.  A stigmatized property is one of which carries a stigma – it has a bad, sad, or icky reputation in the neighborhood or community.  For example, a property could be stigmatized if it was formerly a meth house – even if it had been cleaned up.  If someone died in the house, it could be stigmatized.  Perhaps a ghost or poltergeist makes its home there – again, not everyone would want to be haunted.

Sometimes entire neighborhoods may be stigmatized. You see it all the time for homes in the “ghetto” or in the ‘hood.  As Realtors, we are not permitted to tell someone “this is a bad neighborhood” because we aren’t there to sell neighborhoods, but houses.  By revealing something like that – which a buyer WANTS to know – we could be found guilty of breaking fair housing laws.  To the aggravation of many buyers, the agent may give a phone number to the local police and advise the buyer to call for crime reports in the neighborhood.

The agent who did my training when I was first licensed always made me laugh with this, but she’d reach behind her and pull the imaginary monkey off her back and throw it across the room.  She never wanted the monkey on her our backs… instead she said give the buyer the resource to find the information on their own.  That way, they’d have all the facts but we’d be safe from future litigation.

When you work with a seller, however, things are very different.  If we know of any material or other defects to the house, by law we MUST disclose them.  Now if it’s something obvious like there’s a tear in the carpet in the middle of the living room or a hole in the wall, we’re off the hook.  However, if the seller covers the hole with a big rug- whoopsie.  The rule of thumb I follow is DISCLOSE DISCLOSE DISCLOSE.  There’s no mincing words, there’s no easy way around it, there’s no gray area. 

What started today’s conversation? ***WARNING GRAPHIC DESCRIPTION***  I read in the member-only area of Realtor.org that a case had been thrown out in Alaska where a woman had passed away in her home.  Her body wasn’t discovered for about a month, so as she decomposed her bodily fluids drained, they seeped into the floor and caused structural damage to the home.  The daughter of the deceased, the Realtor and the broker were unaware of the damage to the home AND the buyers made it clear they were not interested in receiving a property condition disclosure form.  When they found the damage after purchasing the home, however, they sued.

The trial court ruled in favor of the Daughter, and the Buyers dismissed the Brokerage from the lawsuit in order to appeal the trial court’s ruling.  The Supreme Court of Alaska affirmed the lower court’s ruling. The court first considered the allegations against the Salesperson and the Brokerage.The court ruled that because the Buyers had dismissed the Brokerage and Salesperson from the lawsuit, they did not have a judgment that could serve as the basis for an appeal. The Buyers had dismissed the Brokerage and Salesperson from the lawsuit because the trial court had only granted judgment in favor of the Daughter in its ruling, as the Brokerage and Salesperson had not filed a motion seeking judgment in their favor.

The judgment also found that the buyers understood they were waiving the right to disclosure and that the daughter had said from the beginning that she did not live in the home so felt uncomfortable disclosing what she didn’t know, therefore the appeal wasn’t sustainable.

When I work with a buyer, I insist on a property condition disclosure form. When I work with a seller, I encourage them to complete the form honestly and in detail.  And if I know anything about the property that the seller refuses to reveal, I 1.) won’t work with the seller, or 2.) will disclose it to the buyers agent in writing and with the knowledge of my seller.

Meanwhile, I found the photo above in a blog post about how you can save money buying stigmatized property. 

You can find a bargain in just about every neighborhood these days, but if you’re looking for a deal with a price that’s been “slashed,” try searching for the home where the “slasher” lived.

Not for me, but whatever toots your horn!