What is a Stigmatized Property?
Within the real estate industry there is a term called Stigmatized Properties or Psychologically Impacted Property.
These are terms used to describe homes that may have an unfavorable quality but is not related to its physical condition.
The psychologically traumatizing event doesn’t directly affect the functionality or appearance of the home but may trigger a negative psychological effect on a potential buyer that would prevent them from buying the home.
This negative effect of the stigmatizing event may make it much harder to sell and could ultimately adversely affect its market value and the market value of the entire neighborhood.
A stigmatized home is not only where a homicide or suicide took place. In fact, there are many examples where a home might be considered a stigmatized property.
A stigmatized home is any property that may have a negative psychological effect on a potential buyer. Some examples might be where:
- Murder (mass murder) or suicide took place;
- Notorious criminal or gang leader lived;
- Well-known drug house stands;
- Grow-op existed;
- House is reportedly known to be haunted;
- Property is next to cemetery,
- Group of sex-trade workers live or work;
- Old burial ground exists;
- Physical torture occurred;
- Bodies were buried;
According to a research paper written by Patrick Gourley on November 6, 2015, “The costs of social stigma could be large. A non-rigorous estimate concluded that a house loses 10-15 percent of its value on average if someone is murdered on the property (Milford 2013).”
Does a psychologically stigmatized home have to be disclosed by law?
No. Realtors in Canada (except for Quebec) do not have to disclose when a psychologically stigmatizing event occurs within a property. It is considered Buyer Beware.
Canadian Realtors practice under common law and there is no legislation that defines or deals with stigmatized properties.
Although it is morally and ethically appropriate, majority of agents do not disclose any psychological stigma regarding the property for fear they will not be able to sell it.
A psychological stigma is a non-physical attribute of a property that may provoke a negative emotional response by the potential buyer.
Stigmas are based on an individual’s perception and emotional spiritual belief system so the stigma will vary from each person.
How Many Stigmatized Homes Are There?
Surprisingly there are hundreds of thousands of psychologically stigmatized homes across North America. Astoundingly there are over 800 reported in Alberta.
There is an interesting website called House Creep dot com. All addresses and posts are user submitted. The site was designed to compile a list of all the stigmatized homes in Canada.
Because disclosing stigmatized properties was not a Realtor’s liability but more of a Buyer Beware situation, users update this site for informational purposes.
How Does a Stigmatized Home Affect Property Value?
The value of a stigmatized property can be a huge concern for the owner but also for the neighbors surrounding the property. It is imperative to have a clear understanding how to sell a psychologically stigmatized property so the neighborhoods’ value doesn’t decrease.
To maintain the stigmatized property’s value and the integrity of the neighborhood, it is imperative that the Realtor must overcome the stigma concerns as fast as possible.
If a stigmatized home and neighborhood is not taken care of quickly then the property value of the home and neighborhood may suffer drastically.
Here are the results from an interesting survey regarding haunted houses. It is strong evidence to support that stigmatized homes need to be listed by only those who know how to overcome and satisfy a buyer’s’ objections.
Realtor dot com Survey Results:
According to realtor dot com, in 2013 they surveyed nearly 1,400 people regarding stigmatized properties that claimed to be haunted.
The survey revealed that “consumers expect discounts when buying haunted houses for sale and intolerable scary occurrences.”
Their data revealed the following:
Sentiment regarding a haunted home purchase:
- 26 percent indicated they would consider purchasing a haunted house for sale;
- 36 percent might consider a haunted home purchase;
- 38 percent would not consider a haunted home purchase.
Consumer experiences with haunted real estate:
- 51 percent heard about someone else’s haunted home experience;
- 35 percent lived in a home they suspected to be haunted;
- 25 percent have researched a home’s history to find out any eerie past incidents.
Most popular warning signs a home could be haunted:
- 61 percent thought a cemetery on the property could be an indication;
- 50 percent thought homes over 100 years old could be haunted;
- 45 percent considered quick transitions in owners could be a sign;
- 45 percent believe that an unexplainable low price on the home is alarming;
- 43 percent suspected homes in close proximity to a battlefield could be haunted.
Of the respondents who would consider purchasing a haunted home, many indicated that they would expect discounts on a property:
- 12 percent would pay full market value or more for a haunted house for sale;
- 34 percent would purchase a haunted home if it were discounted 1 to 30 percent;
- 22 percent would purchase a haunted home if it were discounted 31 to 50 percent;
- 19 percent would purchase a haunted home if it were discounted 51 percent or more.
Among the respondents who would contemplate purchasing a haunted home, the following spooky occurrences would scare them away:
- 75 percent, levitating objects;
- 63 percent, objects being moved from where they were placed;
- 63 percent, ghost sightings;
- 61 percent, supernatural sensations;
- 61 percent, flickering lights/appliances;
- 60 percent, strange noises (footsteps, doors slamming);
- 34 percent, warm or cold spots.
Although you may not believe in haunted houses, there are many buyers in the marketplace that do! Lorri has customized a Seller’s Listing Plan for a Stigmatized Home and a purchaser’s Buying Program for Stigmatized Property.
Lorri Brewer’s expertise and experience is evident once you review her plan to buying or selling stigmatized properties.