By: Victor Normand
Published: November 2014
In all states, home sellers and their real estate agents are obligated to disclose known material defects like a leaking roof or an inoperable heating system in a property for sale. Material defects are defined as those conditions that could affect the value of a home. In Massachusetts, the Consumer Protection Act, Chapter 93A, requires such disclosure even if a potential buyer does not ask. Failure to disclose material defects could subject the agent to treble damages, plus legal fees. But the question is, can matters of an intangible nature be considered material?
Can the fact that crimes, like murder or the presence of a ghost or other paranormal event, psychologically stigmatize a property as to materially affect its value? The fact is that one in four Americans is superstitious and there are several examples of severely depressed values on stigmatized properties. The former home of Nicole Brown Simpson where she and a friend, Ronald Goldman were murdered, sat on the market for two years and eventually sold for $200,000 less than the asking price. State laws on disclosure vary widely.
In Tennessee there is no duty to disclose, and a real estate agent who does disclose such stigmatizing information without permission can be held liable for breaking the fiduciary relationship between the seller and the agent. In California the law does require disclosure for deaths at the property, but only if the death occurred within the last three years, and was not AIDS related. In Massachusetts, there is clarity on the subject.
While Chapter 93A would seem to require full disclosure, the legislature created an exception by passing the “Stigmatized Property Law.” The law states that whether a property is “psychologically impacted” is not a material fact that requires disclosure. However, if asked by a potential buyer about a crime or death of an occupant, the real estate agent must respond accurately as to what is known. There is no duty to volunteer any information, but if asked, the agent must disclose. There is no obligation on the part of the agent to investigate and the potential buyer’s questions should be referred to the local police department.
By extension, paranormal events that may stigmatize a property; think The Amityville Horror, need not be disclosed voluntarily, but should be addressed if asked. In New England where homes are much older than other parts of the country, there may be no knowledge on the part of the current owners of what may have happened in the house 50, or 100 or more years ago. And then there is the issue of what situation might exist in the neighborhood.
Courts have suggested in certain cases that there may be no need to disclose non-physical “transient social conditions” in a neighborhood. The matter of sex offenders living nearby presents both a legal and ethical/moral challenge for real estate agents. While sex offenders are not of themselves a protected class like minorities, children, or the handicapped, the best advice for a real estate agent is to disclose.
Real estate agents representing Buyers and Sellers need to know the laws and act accordingly in all matters relating to disclosure. Private sellers on the other hand are not required to disclose anything, other than the presence of lead paint. They have no duty to disclose things like the condition of the roof or the presence of ghosts, which makes using the services of a Resident Expertsm always the right thing to do.