Stigmatized Property: Definitions & Disclosures

Homes aren’t always safe spaces.

And when bad things happen on the grounds of otherwise good properties, those issues can negatively impact a home’s value, as well as its overall marketability.

Real estate agents refer to these problem homes as “stigmatized properties”—residences where a death, violent crime, or some other type of sordid business took place in the past.

When it comes to stigmatized property, what disclosures, if any, are required of sellers and their agents?

What does and does not constitute as a stigmatized property, and are there legal ramifications for keeping negative information about that property under wraps? Let’s explore these questions and more in detail below.

Disclosures required for sellers & their agents

In 2012, the Pennsylvania Supreme Court heard oral arguments over a stigmatized property case.

The homebuyer sought damages from the seller, who they said failed to disclose that a murder-suicide took place on the property, something that constituted—in the plaintiff’s eyes, at least—a “material defect” that significantly impacted the property’s value and was therefore worthy of disclosure.

The plaintiff ended up losing that case. Consequently, the lawsuit didn’t lead to any changes in Pennsylvania’s laws, or establish any important judicial precedent for the state moving forward.

As a matter of fact, very few states maintain any sort of legal requirements with respect to stigmatized property disclosures. The only three that do are California, Alaska, and South Dakota.

So, if you’re selling a stigmatized property in one of those states, be sure you’re familiar with the disclosure requirements there.

Criteria for stigmatized property status

Because requirements shift from state to state, and there are no real guidelines to speak of, there really aren’t any hard and fast criteria for stigmatized properties.

As long as the property adheres, loosely, to the definition outlined at the beginning of the article, it likely qualifies as such.

But it should be noted that violence and death aren’t the sole causes of stigmatization when it comes to real estate.

The manufacture and sale of illicit drugs, cult activity, and the sex offender status of neighboring homeowners (as well as the sex offender status of the home’s previous owners) can cause near-irreparable reputational damage to a property, thus stigmatizing it.

The financial status of the seller has the potential to stigmatize the home, too. If the seller had numerous outstanding debts, and collectors are still appearing on the premises to try and get what they’re owed, this can dissuade otherwise interested buyers in pursuing the sale.

Now that you have a better understanding of what a stigmatized property is, and what’s required on the disclosures front, you can try to put that home on the market.

Remember, just because there aren’t many concrete rules regarding disclosure doesn’t mean it isn’t in your best interest as a seller to be transparent. Practice good judgment. Best of luck with the sale!