Would You Buy a Home with "Emotional Defects"?

You’re looking for a new home, and you’ve finally found it. It has everything you want. You want to make an offer.

But you’ve just learned that a prior owner was murdered in the house. Or maybe you’ve heard that the house is haunted.

Still want to buy it?

And if you’re the seller, would you be willing to disclose such unpleasantness to potential buyers?

Disclosure laws vary from state to state. Consider the reported case of Pennsylvania resident Janet Milliken. After her husband died, she moved from California in 2007 with her two children, buying a house for $610,000. Two years later, she learned that a murder-suicide had occurred there. She found this information particularly upsetting because her family was still grieving her husband’s death. Milliken sued for fraud and misrepresentation, claiming the owners and real estate agents duped her. A county judge ruled against her, saying Pennsylvania state law doesn’t require agents to disclose such events. Milliken has appealed to the state’s supreme court.

Pennsylvania is not unique. For example:

Massachusetts law says the possibility of a property being “psychologically impacted” is not considered a “material fact required to be disclosed to buyers.”

Virginia says murders and ghost sightings must be disclosed only if they physically affect the property. (If doors open and close by themselves, for example, the owner must disclose it.)

In California, sellers must disclose “emotional defects” in a limited way: A death on the property must be reported only if it occurred less than three years prior to the sale; earlier deaths must be disclosed only if the buyer asks. (Memo to buyers: ASK!)

In Texas, sellers don’t need to inform buyers of nonviolent deaths that occurred on their property, but violent ones (such as murder and suicide) must be disclosed.

Most states require sellers to report all known facts on a “seller disclosure statement,” which some judges might interpret to include deaths or occurrences that could cause someone to believe a place is haunted. But the flood of foreclosures in recent years has caused banks to sell homes with disclaimers that disclosure statements are not available.

If you’re buying a house and want to know whether someone died there, visit diedinhouse.com, a website that shows homeowners or potential buyers — for a $12 fee — whether someone died inside a residence. Its creator launched the site after discovering that a house he owns is haunted, and local law did not require the seller to inform him.

It’s harder to sell a house if something unpleasant occurred there. Small wonder real estate agents refer to such houses as “stigmatized properties.” So if you would be disturbed to find out your house has a past, it’s probably worth your while to research the history of any house you’re interested in buying — especially if disclosure laws in your state are lax or unclear.

On the other hand, if you’re among those who would be undisturbed by such events — some even feel that ghosts offer added charm to an otherwise ordinary house — you might ask your Realtor to show you stigmatized houses. You could find a great house at a cheap price.

In the end, if you find yourself living with a ghost, a lawyer might not be able to help. So who you gonna call?

Dr. Venkman, of course!

Originally published in Inside Personal Finance April 2014

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