Disclosures vary in every state, but most relate to material defects and physical things which are wrong with the home. What if you’re selling an amazing property which has everything going for it, but there’s a catch – someone has died in it. Even if it’s not a recent death, you need to be aware of your disclosure responsibilities.
Disclosure Factors To Consider
The purpose of disclosure laws is to protect prospective buyers, by ensuring they have sufficient information about a property to make an informed decision. But, in the same way a flood-prone basement may be considered a material defect, a past death in a property can be considered a psychological or emotional defect.
Disclosure laws about this vary by state. For example, in California, the disclosure responsibilities for a natural death are the same as if a violent death or homicide occurred on the property.
The “Stigmatized” Property Concept
A property is considered to be “stigmatized” when a suicide, murder, criminal activities or other events have occurred there which can negatively influence perceptions about the property. The concept of a stigmatized property can also refer to the street or an area of the city where the property is located. When a property is stigmatized, the negative opinions have nothing to do with the physical aspects of the home. The issues are considered “psychological” or “emotional” defects.
Effects Of Property Pricing
Buyer perception will vary according to individual taste. Often, it does depend on the nature of the death, rather than the death itself. For example, a violent home invasion and murder is likely to have more impact with a buyer than an elderly resident who simply passed away at home. For some buyers, a murder or suicide in the home will be a non-negotiable deal breaker.
Wright State University researched stigmatized properties in 2011 and found that these properties sold for 3% less than market value. The time it took to sell the homes was also much longer than the average (approximately 45% longer than regular homes).
But there are other groups of buyers who will not look so negatively upon a death in a home. For example, property developers may place less importance on the issue than a regular home buyer, particularly if they plan to knock it down and build apartments.
Where To Find Information In Your State
Your disclosure responsibilities about deaths in a property you are selling or renting are dependent on your state. In California, the Civil Code says that if someone has died on the property in the past three years, it is considered a “material defect”. This extends to any cause of death in that timeframe – even those from natural causes. Under the code, you would not need to volunteer the information about a death if it occurred more than 3 years ago in the property. However, the statute states that if a prospective buyer asks you directly if deaths have occurred at the property, an agent or seller cannot lie and you must disclose this information.
The California code does make an exception for the disclosure of deaths caused through AIDS, as this is considered a disability. Therefore, disclosure of this death would be considered discrimination and is not required under any circumstances.
In Arizona, you don’t need to disclose deaths to buyers – natural or otherwise. In Georgia, you have no obligation to disclose unless the buyer asks you if someone has died in the home, in which case you must answer truthfully to the best of your knowledge. In South Dakota, the seller must disclose whether there has been a murder or suicide in the past 12 months. In Oregon, no disclosure is required at all. See a discussion of Psychologically Impacted Property in Colorado.
State laws can change over time, so it’s best to check the current legislation whenever you find yourself dealing with a home which has experienced a recent death.
How Can Agents Protect Themselves?
In states where disclosure about death is a requirement, your seller may be prompted to disclose on the appropriate disclosure forms. However, it’s important to recognize that ignorance is not an adequate defense if you (or your seller) are found to have failed in your duties to disclose. You should take all necessary steps to inform yourself of the relevant laws and statutes in your state. With disclosure forms, ensure your sellers fill everything in completely. Never fill in disclosure forms for your clients.
If your seller discloses to you their knowledge of a death in the property, in many states you may need to disclose if asked the question. In California, a lawsuit can be filed against a seller, lessor, an agent or a broker for failure to disclose.
CRES has more than 20 years of experience in protecting real estate agents and brokers. We take your protection very seriously. With CRES Real Estate E & O + ClaimPrevent®, you’ll have on-call access to Legal Advisory Services, 7 days a week. Contact us on our toll free number 800.880.2747 to speak to a CRES real estate insurance professional and start protecting your business today.
Have you ever been asked by a prospective buyer (or tenant) about deaths in a home? Did your answer make a difference in whether they bought the home or not?