Stigma Properties: Must a Seller Disclose a Prior Murder, Suicide or Grow Op In a Home?
Would you buy a house if there was a murder or suicide there before, a criminal lived there, or it was used for illegal activity?
These are examples of “Stigmatized” properties or properties with a Stigma.
If a property has a known stigma it can make it very difficult to sell that property in the future.
It can also significantly reduce the value or price buyers are willing to pay.
We’ve all heard the term “buyer beware”.
But is that fair when you’re spending $1,000,000.00 or more on a property?
Many buyers believe that these stigmatizing issues must legally be disclosed during negotiations for the purchase of any property.
What is a stigmatized property?
Stigmatized properties are those which have non-physical issues or features that may affect their selling value.
This includes events such as past homicides, suicides, or unnatural deaths and can also include supernatural issues, such as evidence that the home may be haunted.
Do Sellers or their Agents have to disclose a stigma?
Here’s where it gets tricky, or shall I say more of a grey area.
In Ontario, there is no legal requirement yet for sellers to disclose a past death or murder in the home.
This applies to sellers who have no knowledge of past events in the home (since they aren’t the original owners).
It also applies to sellers who do have knowledge of past events in the home that can deem a property stigmatized.
While I just explained the legal position the government takes for Sellers, it can be a somewhat different answer for Realtors.
The Ontario Real Estate Association, holds the opinion that Realtors should disclose if a property has a stigma, when they are representing Sellers and the agent knows of the stigma, or that the events that have occured.
OREA suggests that realtors have an ethical obligation to disclose these issues to prevent issues down the road relating to Agreements and negotiations relating to that property.
However the Real Estate Council of Ontario (RECO) states that, unlike a latent defects, “there is nothing physically observable or measurable associated with a stigma.”
Therefore the laws governing Realtors don’t define “stigma”.
So in reality it seems that disclosure obligations seem to differ.
They differ between legal obligations vs. moral obligations.
And they differ between what a Seller must disclose (to their agent or directly to a Buyer) vs. what a licensed Realtor must disclose (if they are aware of a stigma).
I recently posted a great video called: “What Are Sellers [Required] To Disclose When Selling a Home?”
In that post I talk specifically about material latent defects, what is considered to be a latent defect, and what a Seller must disclose.
If there are material latent defects on a property the seller is required to disclose those defects.
The seller’s representatives (agents) are also required to disclose material latent defects, if they are aware of those defects.
However, like I said earlier, as of now Stigmas are not considered to be latent defects as they are not observable or measurable.
People who know me will tell you I’m all about integrity.
So I’d like to think that all real estate professionals should follow a code of ethics, whereas a member of the public who is selling their house privately, might not be required to do themselves.
And while I’d like to give all Realtors the benefit of the doubt, that doesn’t mean that their clients (a.k.a the Sellers) actually told the agents.
So they might not know about any stigmas.
I always like to end by offering some great advice so here is what I tell anyone who’s looking to buy a home.
One idea for Buyers (or their Agents) is to Google the property address.
These days if something significant happened in a property it might have made the news and therefore would be online.
Another option is to visit Housecreep.com which offers a list of stigmatized properties.
If you’re thinking of buying a home and want to know more about how to do it safely and protect your investment you’re always encouraged to ask me any questions you have.