What Is A Stigmatized Property? The Pros And Cons
Lauren Nowacki7-Minute Read
October 29, 2021
Whether you’re buying or selling a house, it’s important to consider the property’s past when determining its future. This is especially important when it comes to stigmatized properties.
Although the events that occurred in stigmatized properties don’t have a physical effect on the home, sellers and buyers should consider how it will impact its market value. Let’s review what a stigmatized property is, some ways a house becomes a stigmatized property, and the pros and cons of buying or selling one.
What Is A Stigmatized Property?
A stigmatized property is real estate that has a negative psychological impact on prospective home buyers due to previous events that occurred there. Although stigmas are unrelated to the styles of homes or their physical appearance, they can affect home value, making the house harder to sell at full price regardless of its location or physical condition.
Ways A Home Becomes A Stigmatized Property
A stigma is a tarnish on a person, place or circumstance that may make it undesirable. When it comes to properties, certain stigmas may lead a potential buyer to lowball their offer or walk away from the property completely.
If you’re selling a stigmatized property, think about issues that may be deal-breakers for potential buyers and how you can ease concerns about them. If you’re buying a stigmatized property, are any of these issues deal-breakers or things you can live with for a lower sale price?
Here are some examples of circumstances that lead to stigmatized properties:
Sites Of Infamous Crimes
An infamous crime or murder in a home can result in a 10% – 25% loss in value, according to Randall Bell, an appraiser of homes that have been the site of some of the most notorious crimes in the U.S. In his interview with Rolling Stone magazine, he’s credited with consulting on Nicole Brown Simpson’s condo, Jon Benet Ramsey’s home, the Heaven’s Gate Mansion and the site of the Manson family murders.
There can be several reasons why someone may not want to purchase a home where an infamous crime took place. There could be damage to the home from the crime itself – including bullet holes, broken windows and biological contamination – or deterioration from sitting vacant for some time. Others may be superstitious or feel like moving into the home would bring bad karma or luck, while some may see the sites as sacred spaces.
Places Of Other Criminal Activities
Properties that were used as sites for a criminal activity like illegal gambling, drug dealing, gang activity or prostitution can be unattractive to potential buyers. There might be a fear that former clients of the previous owners don’t realize there are new, non-criminal owners. Prospective buyers may also want to avoid being associated with whatever illegal business went down in the home.
Famous TV And Movie Homes
Movies and TV shows often film inside real homes or at least use them for exterior shots. Just like any normal home, these houses may eventually go up for sale. In recent years, the McCallisters’ house from “Home Alone” and Buffalo Bill’s “Silence of the Lambs” house were put on the market.
While people may think it’d be cool to live in a house featured on a television show or a movie, there are some drawbacks. For example, the home can draw an unwanted stream of tourists or super fans of the show. It can also lead to unwanted engagement from said group.
One prime example is when “Breaking Bad” fans, re-creating the infamous pizza scene, would actually throw pizzas on top of the house used in the show, causing the owner to install a 6-foot-tall iron fence around the property.
A home’s use in a film or TV show may also carry unwanted expectations to leave the home exactly how it was on the screen. While the homeowner may not care as much, they may hear other opinions from family, neighbors or complete strangers.
Of course, if the homeowner was a fan of the show, the pros might outweigh the cons. It’s a great conversation starter and a chance to own a piece of TV or movie history. It’s also a fun way to show the home off to visitors. Who else could walk around their home and point out all of the cool scenes that captivated millions of viewers?
A home with a reputation for paranormal activity can make it harder to sell, since many potential home buyers that believe in the supernatural may take issue with sharing their home with spirits, especially if the homeowners have children.
Though it may seem intriguing at first, experiencing unexplained noises, shifts in temperature, moving objects or ghostly apparitions can become a nuisance. They could possibly put you in danger or affect your mental health. Like many of the famous haunted houses in America, these homes may have a depressing history, or give off a melancholy or creepy vibe that makes it hard to live in.
It’s important to keep in mind that paranormal experiences are often subjective. Many times, there are completely reasonable explanations for what’s really going on. Before you decide whether your home is haunted, consider why you think the home is haunted and investigate other possible causes of activity before attempting to sell or purchase the home. For example, cold spots could just be unknown drafts and strange noises could just be loose plumbing or pests roaming around.
Homes Of Debtors
Former homes of people in bad debt, particularly those with aggressive creditors or seedier loan sharks, may be unattractive to future buyers who worry about continued visits from collectors or other forms of harassment attempting to collect what’s owed to them.
The home purchase could come with extra fees, too. If the previous owner was in debt with the IRS on property taxes – meaning they didn’t pay them – the buyer may be responsible for paying the back taxes on the property.
Houses With Neighborhood Issues
When it comes to buying or selling a home, consider the surrounding area. It isn’t just a property that can be stigmatized; the neighborhood can be, too. While any of the above stigmas may not have happened in the home you wish to buy or sell, if they happened just down the street, the home could still have a marred reputation by association.
Another stigma has to do with the types of people who live within close proximity to the home. For example, some people may want to avoid living near a convicted felon or a registered sex offender.
The Pros And Cons Of A Stigmatized Property
Before purchasing or selling a stigmatized property, consider the potential benefits and drawbacks.
The Pros Of A Stigmatized Property
One of the primary benefits of purchasing a stigmatized property is the potential for getting a great deal on the house.
If the house has a stigma attached to it, the current owners might have a tough time finding a buyer who’s willing to pay the full asking price. If you’re willing to look past the disclosed stigma, you might be able to negotiate a lower price for the property.
The Cons Of A Stigmatized Property
As said previously, there are a few downsides to buying a house with an attached stigma. For starters, people who are familiar with the stigma may frequent your home, not knowing that the property is under new ownership. For example, debt collectors or fans of the haunted house could continue to stop by unannounced.
In the long term, you may have trouble reselling the house for its market value, or have trouble finding a buyer altogether. Keep this in mind when investing in a stigmatized property.
Stigmatized Property FAQs
Now, let’s dive into some frequently asked questions surrounding stigmatized properties.
Do sellers have to disclose stigmatized properties?
Information that sellers are required to disclose on Seller’s Disclosures will vary state by state. For example, most states don’t require the disclosure of deaths or crimes. A few states do require disclosures of deaths or crimes in the home, but only if they happened within the last year. For example, California requires the disclosure of a death in the home if it happened within the last 3 years.
Disclosure requirements may depend on whether states deem such stigmas as material fact or not. Material fact is a fact that someone believes is important or essential information to be aware of when deciding whether to buy the home. Nonmaterial facts are less important or even trivial information that shouldn’t affect the decision.
While reasons for a stigmatized property may not have to be disclosed on paper, many states require real estate agents and sellers to answer truthfully if asked about the existence of a stigma.
Many states have also adopted a caveat emptor (“buyer beware”) policy, which puts the responsibility on the buyer to ensure the quality and sustainability of the home and learn more about the home’s history.
How do I find out if a property is stigmatized?
If you’re buying a home, it will generally be up to you to find out if it’s a stigmatized property. As mentioned before, a real estate agent must, if asked, disclose whether a property is stigmatized.
However, in most states, the sellers are under no obligation to find out whether there’s a stigma attached to the property. That means, if you’re selling a property, you aren’t responsible for digging into its history to find any stigmas.
If it’s important for you to know if you could be purchasing a stigmatized property, start by asking the agent and seller if there are any stigmas associated with the home. You should also Google the full address to see if there are any recent news articles about the property or area.
You can also use a crime mapping service and review the National Sex Offender Public Website to help you determine if the neighborhood is safe and without stigmas.
How can I find stigmatized homes for sale?
When working with a real estate agent, let them know that you’re interested in buying a stigmatized property. They’ll be able to use their knowledge and connections to try to find those types of homes.
You can also do some digging on the internet. There are entire websites devoted to stigmatized properties and ones that provide articles or even lists of certain stigmas on the market, like movie settings or haunted houses for sale.
The Bottom Line: A Stigmatized Property Can Be Harder To Sell And Cheaper To Buy
A stigmatized property is a piece of real estate that’s experienced an event that might cause a negative psychological impact on a buyer and scare them away from purchasing the property. As a seller of a stigmatized property, you may experience a longer time on the market and lower offers on your home.
As someone buying a stigmatized home, you may be able to buy it for less. Just remember, you’ll have to deal with any drawbacks of buying this type of home, so weigh your options carefully.
If you’re looking to sell a stigmatized property in the near future, work with a Verified Partner Agent from Rocket HomesSM.
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