STEPHEN MORANIS, FOR POSTMEDIA
Do you really believe in ghosts? Is this a deal breaker? Is the house that you purchased and are now moving into really haunted with ghosts and spirits? Because I am sure most people do not want to be celebrating Halloween every day.
This brings up the fundamental question of stigmatized properties: what are the disclosure requirements and ultimate ramifications of discovering peculiar or disturbing facts and circumstances about your new home? And what happens if you learn about them after you have already firmed up the purchase?
Of course, this all depends on who the buyers are and what their personal sensitivity is to these kinds of queasy, eerie and dramatic real life circumstances – or what are called stigmatizations – that may have occurred at some time in the home’s history.
Normally a buyer can investigate the neighbourhood by googling a number of sites that describe the quality of the schools, the safety of the community and availability of various features and amenities.
But what if something happened in the house or nearby that might be a psychological negative to you and your family? Would this be something that could affect the value of the property if it were widely known and disclosed?
Provincial real estate regulators have devised a common definition of stigma in the context of a real estate transaction. They describe it as a non-physical, intangible attribute of a property that may elicit a psychological or emotional response on the part of a potential buyer. These may have been an event or circumstance that occurred on or near the property that does not affect the property’s function or appearance, but might be considered by some as emotionally disquieting. Unlike a latent or patent defect like a wet basement or leaking skylight, there is nothing physically observable or measureable associated with a stigma.
Of course, real estate agents are required to attempt to uncover the facts of a property by doing their research and due diligence. The Realtors Code of Ethics requires agents to disclose material facts affecting the property to all of their customers and clients. But there seems to be no real estate case law that requires a seller or their representative to disclose the existence of a stigma to a potential buyer. For instance, what if the seller does not want their agent to disclose that there was a grizzly murder that had been committed in the house?
Other stigmatizations could be that the house was the scene of a death, suicide or violent crime. It may have been frequented by gangs or drug dealers, or perhaps at some point operated as a brothel, meth lab or marijuana grow op. None of these facts have to be disclosed by the agents and/or by the law. Agents typically will try their best to disclose all that they know and discover, but many of these events may have taken place 10, 20 or 50 years previously and it is sometimes hard to find all of this out now.
One of my best suggestions is to go to www.housecreep.com, a site that discloses murders and other serious occurrences that may have taken place in the home. It is a definite must-visit website as part of a home buyers’ own research when looking at prospective homes.
The principle “caveat emptor” is really in effect here: let the buyer beware. This is extremely risky and troublesome, especially if the stigma is one that is particularly disturbing to a potential buyer. It is so important to dig deep and find out what the full story is beneath the surface of the home. You need to be in tune as well with the surroundings, which could affect the value and safety of your purchase.
I can recall we once considered a home that was close to a hydro substation. My scientist wife insisted we dig deeper to see if there were any possible health effects. We found someone who measured EMFs (electric and magnetic fields) and discovered that the readings were very high. In addition, he told us about a Swedish study that linked high EMFs to cancer; because of this stigma, we took a pass on the home.
As a buyer, you must be thorough and relentless in uncovering as much as you can about any house you are considering for purchase. Besides the features and condition of the house, you must ensure that any concerns about safely, health and security are met, as well as uncover any stigmas which might prove troublesome to your psyche and ultimate peace of mind.
Stephen Moranis, B.Comm., MBA, FRI, CMR has been active in the North American Real Estate Industry for more than 40 years. He is a former President of the Toronto Real Estate Board and a former Director of the Canadian Real Estate Association.