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Haunted Home? You May Need to Disclose Before You Sell It.

Have you ever considered the possibility that the house you just bought is haunted, like in the movies “The Amityville Horror” or “A Haunting in Connecticut?”

Whether you prefer your housemates to be normal or paranormal, is it too much to ask for a straight answer on the presence of poltergeists before you get to closing?

Since one person’s ghost is the next guy’s windblown table cloth, determining the spectral state of a prospective home isn’t always easy.   However, the law makes clear some important disclosure requirements (this article is not legal advice: real estate laws vary greatly by locality – always consult a lawyer if you’re looking to get involved with a stigmatized property).

Real estate with a checkered history, such as site of a murder, or even a potentially good history that could cause unwanted traffic/gawkers (e.g. George Washington slept here) may be classified as stigmatized property.   This must be disclosed, because a home’s notoriety will affect the future value, either in wary buyers or unwelcome sightseers.  Haunted houses may or may not fit the definition.

Generally speaking, the owners of stigmatized properties must disclose the stigmatization if they wish to sell the home. Disclosure requirements differ by state, but generally they address:

Criminal stigma:  A property used in the ongoing commission of a crime is stigmatized because neighbors and criminals may know of its past. For example, a house is stigmatized if it has been used as a meth lab, chop shop, crack house, or brothel. Most jurisdictions require full disclosure of this sort of history.

Murder/suicide stigma: Some jurisdictions in the United States require property sellers to reveal if murder or suicide occurred on the premises. California state law does if the event occurred within the previous three years.

Debt stigma: Debt collectors not aware that a debtor has moved out of a particular residence may continue their pursuit at the same location, resulting in harassment to innocent subsequent occupiers. This is particularly pronounced if the collection agency uses aggressive tactics.

Phenomenon stigma: Many (but not all) jurisdictions require disclosure if a house is renowned for “haunting”, ghost sightings, etc. However, the key to establishing phenomenon stigma is that the house must by widely and publicly perceived as haunted before it is sold.  The reasoning is that a property’s spooky reputation will affect its future value.

Ironically, the home where the “Amityville Horror” occurred, arguably the most famous modern day haunted house in the United States, would not qualify as stigmatized by haunting under this definition.  In this house, Ronald DeFeo, Jr. murdered his family. Subsequently, the Lutz family bought the home and claimed that, a little over a year later, evil spirits drove them from their home.  Their claims were “certified” by paranormal investigators Ed and Lorraine Warren. Because this occurred after the home was purchased, the Amityville home would not qualify as stigmatized by haunting.  Since the film’s release, the house has been renovated and the address changed in an attempt to prevent sightseers from disturbing the neighborhood.

The most famous legal case of a haunted stigmatized house occurred in Nyack, NY in 1991.  In this case, the owner had advertised the home to the public as haunted by ghosts before it was sold. The owner, Helen Ackley and members of her family had reported the existence of numerous poltergeists in the house and reported the existence of ghosts in the house to both Reader’s Digest and a local newspaper on three occasions between 1977 and 1989, when the house was included on a five-home walking tour of the city. She recounted to the press several instances in which the poltergeists interacted directly with members of her family. She claimed that grandchildren received “gifts” of baby rings, all of which suddenly disappeared later. She also claimed that one ghost would wake her each morning by shaking her bed. She claimed that when spring break arrived she proclaimed loudly that she did not have to wake up early and she would like to sleep in; her bed did not shake the next morning.

Neither Ackley nor her real estate broker revealed the haunting to buyer Jeffrey Stambovsky before he entered a contract to purchase the house in 1989 or 1990. Stambovsky was from New York City and was not aware of the folklore of Nyack, including the widely known haunting story.

When Stambovsky learned of the haunting story, he filed an action requesting rescission of the contract of sale and for damages for fraudulent misrepresentation by Ackley and Ellis Realty. Stambovsky did not attend the closing which caused him to forfeit the downpayment (although he was then not obligated to buy the house).[2] A New York Supreme Court (trial court) dismissed the action, and Stambovsky appealed.

The court eventually held that since the property in question was previously marketed by the seller as a “haunted house” Ms. Ackley could not claim the contrary. Even so, the court threw out Stambovsky’s fraudulent representation suit and stated that the realtor was under no duty to disclose the haunting to potential buyers.

The majority opinion specifically noted that the veracity of the claims of paranormal activities were outside the purview of the opinion.

So if there really are funny noises in the night in your new home, chances are you’re not going to win a lawsuit against the seller and their broker.  However, if the spirits make your nights too miserable you can sell and you won’t have to disclose either.

But then again, there’s a reasonable market for haunted houses, especially in the Midwest.

Realtor.com recently surveyed 1,910 people looking to buy a home and found that 32 percent, roughly 1 out of 3, would consider buying a “haunted” property. And of those who said they would, 26 percent reside in the Midwestern region of America.

And the paranormal activities people are willing to live with are quite shocking. More than half would live with warm or cold spots found in the house, while 41 percent would even buy a pad where there were reported ghost sightings. Levitating objects? A daring 36 percent wouldn’t mind.

But of these fearless buyers, only 15 percent would pay full market value of the home, while 19 percent were only willing to invest with a 31-50 percent discount. Though, you many get really lucky and stumble upon a buyer that represents the two percent who are willing to pay more than what it’s worth to call the spooky abode home.

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Steve Cook is managing editor of Real Estate Economy Watch, which was recognized as one of the two best real estate news sites of 2011 by the National Association of Real Estate Editors. Before he co-founded REEW in 2007, he was vice president of public affairs for the National Association of Realtors. In 2006 and 2007, he was named one of the 100 most influential people in real estate.