If you have worked in the real estate business long enough, you may have had dealings with “stigmatized property”. The US National Association of Realtors has defined this as, “Any property which has been psychologically impacted by an event, which occurred or was suspected to have occurred on the property, such event being one that has no physical impact of any kind”. Basically, if your house has been built on an Indian burial ground, is haunted by ghosts, or has been the site of a triple murder, the property is considered stigmatized.
Loss of Property Value
Generally, in these stigmatized cases, the loss or damage is generally the loss of property value – but is this actually the case today? Richard Wakelin, director of Wakelin Property Advisory from Melbourne, stated that the fact that a crime occurred at a certain property can make a difference concerning the sale when a “consciousness of karma … weighs heavily on some people’s well-being”. Mr. Wakelin also notes that, “If a murder or other gruesome crime has taken place at a property, especially a high profile one, then the price will be suppressed.” Some people would have no problem living in a house where a gruesome murder took place if the property price is low enough while some would never consider it. But what if you didn’t even know what happened in your new home? If you think your real estate agent is obliged to state these facts before purchase, just take into consideration these two mystical sounding words – Caveat Emptor.
Caveat Emptor
The rule of Caveat Emptor states that the vendor is only obliged to reveal the information relevant to the quality of the real estate being considered, but has no obligation to reveal the elements that could mark the real estate as stigmatized. Simply put, Caveat Emptor ensures that real estate agents can choose whether they will reveal such information to potential buyers or not. Although this is used as the standard rule for residential sales, a number of exceptions in the past have substantially diminished its application.
LJ Hooker Case
An example of this exception is the LJ Hooker case. In September 2004, LJ Hooker at North Ryde made a sale of a house in which, three years earlier, Sef Gonzalez had murdered his parents and sister. The house has been sold to Mr. Kwok and Ms. Lin, both devout Buddhists. After they purchased the property, they discovered the gruesome truth and immediately requested rescission of the contract explaining that due to their Buddhist faith, they were unable to continue living in a house where a murder had occurred. The home value was $800,000 at the time of purchase. The LJ Hooker network agreed to refund the $80,000 deposit paid by the buyers and released them from the contract. But the agency’s troubles were not over.
The New South Wales Fair Trading Commission
The New South Wales Fair Trading Commission brought an action against the real estate agents for engaging in misleading or deceptive conduct. The commission also held them responsible for failing to reveal the property’s gruesome history. The New South Wales Administrative Decisions Tribunal held that the real estate agents had breached the Property Stock and Business Agents Act and had engaged in misleading or deceptive conduct under the Fair Trading Act. It was considered that the purchaser rightfully expected that all the information that might affect the price should have been revealed to them as well as the information that would influence their decision concerning purchase. LJ Hooker network added the following statement on all marketing material: “Notice to Buyers: This property is being sold under instructions from the Trustee of the Estate of the Late Teddy and Mary Gonzales. Mr. and Mrs. Gonzales, together with their daughter, were murdered in the house on 10/7/01.” The final price for the house has been cut down to $715,000.
Hollywood Wedding Cake Mansion
The property that takes the cake is most certainly Hollywood’s “Wedding Cake” Mansion. Only 16 years old and never completed, this house has seen it all – murders, ghosts, gangs, satanic rituals, and yes – aliens! Some claim it rests on an ancient Indian burial ground while some say that the ghost of a murder victim haunts the empty halls. The last owner, Timothy Devine, a former Columbia Records executive, bought the property in 2004 for $3.7 million. Apart from highlighting the incredible view, current agents market the never finished, crumbling and evidently stigmatized property with, “Current owners did some development work but did not finish and want to sell “, a rather creative use of Caveat Emptor. The property has become a Hollywood Hills attraction and was going for $12.5 million in January 2011. Although, currently, the house is listed for an incredible $15.2 million!
Wymering Manor in Portsmouth, Hampshire, UK
Then there is Wymering Manor in Portsmouth, Hampshire, UK. Believed to be the city’s oldest house, Wymering needs major restoration and structural repairs and carries a guide price of STG375,000 ($A631,100). The building was a 17th century vicarage, a monastery and family home as well as a youth hostel from 1960 until 2006. Making appearances on TV’s “Most Haunted” and on Youtube, Wymering’s paranormal activity, including sudden drops in temperature and strange apparitions, has been well documented. The building’s current owner, Portsmouth City Council, is selling it to cut costs. Jeremy Lamb, chartered surveyor at Andrews & Robertson, said the property’s reputation could prove a great attraction. “This is a property of some renown for being haunted, so there is a fair chance a future owner may use it as a guest house because of its novelty factor. It’s certainly a unique selling point and (it’s) not often that we offer a haunted house.” Lamb added, “When I surveyed it, the security guards told me they feel there is something ‘fairly spooky’ going on in the house and, though they patrol it on a 24-hour basis, they refuse to work alone there at night.” Currently, the building has planning permission for use as a hotel. It will be offered by Andrews & Robertson at auction at London’s Grand Connaught Rooms on September 21.
Stambovsky v. Ackley
The case of Stambovsky v. Ackley, 169 A.D.2d 254 (NY App. Div. 1991), made a precedent that is still widely cited by courts, printed in textbooks and taught in U.S. law schools. The purchaser of the property, Jeffrey Stambovsky, filed an action requesting rescission of the contract of sale and for damages for fraudulent misrepresentation by the owner, Helen Ackley, and her realtor. The reason for the request was unique. Stambovsky argued that he ought to have been informed that the property was haunted by three ghosts including a civil war naval lieutenant, a man in his 60s, and a young child with a round, apple-cheeked face who once ate a ham sandwich belonging to the owner. The judge in this case awarded damages, stating that the vendor had previously advertised the property as being haunted by ghosts, and since Helen Ackley was ‘unable to deny [the ghost’s] existence, and [therefore that] as a matter of law the house is haunted.’
Guest contributor: Sell My Castle, Australia, was founded in 2006 to help you compare real estate agents in Australia for things like marketing plans, profiles and more. More information is available at http://www.sellmycastle.com.au/
