Monday, January 28, 2008

Stigmatized Properties: Killing the Sale

Would you buy a house that was the site of a homicide or suicide? Many people could care less, but many people are adamantly opposed; this puts sellers and their agents in an interesting position when it comes to disclosure.

There is no doubt that disclosing this information will “stigmatize” the property, and at least in the eyes of many, make it unsuitable for living or cause a price reduction. These effects hurt both the seller’s and the agent’s bottom line. So what do you do?

Missouri has enacted a statute for guidance: MO Statutes 442.600

The fact that a parcel or real property…may be psychologically impacted [site of homicide, suicide or occupant had HIV/AIDS]…shall not be a material or substantial fact that is required to be disclosed…

It goes on to say that no cause of action can be brought against a real estate agent or broker that failed to disclose the fact.

As usual Kansas has different rules, or here a lack of rules on the subject. Kansas Statutes and Cases have not yet addressed this issue which leaves the point up for discussion.

Kansas requires the disclosure of “material facts.” It would ultimately be up to a jury to decide what is “material." So, think of your view, your spouse’s view, and your friends' views on this subject and try to determine which stance is reasonable. If you think a reasonable person could think the value is affected by the information, then you should probably disclose it.

On the flip side, if you do disclose it you are dooming your client to less money. Does that breach your fiduciary duty? What if you’re wrong and Kansas law ends up similar to Missouri’s law?

Say hello to Rock and Hard Place. The key is, that in Kansas you must be up front with your client. Tell them they are not yet required to disclose, but a jury may disagree with their ultimate decision if they choose not to. All the while you must realize that if you tell them to disclose and they get less money they may want to sue you for your “faulty” advice.

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1 comment:

Anonymous said...

Just thought I'd check out your blog. Looks like you're too busy keep up with it. I certainly can't talk though because mine's the same way. You can view it on my website at http://www.clayandplatte.com

I was reading your post "Stigmatized Properties" and just realized that I almost had this happen several weeks ago when one of my sellers mother passed away. She was living with them but they actually did get her to the hospital before she died so technically I guess I shouldn't have to worry about this. Of course it's not a murder or anything like that. Ha Ha.

August 12, 2008 at 12:44 PM

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