What Is a Stigmatized Home?

Real Estate

This Mold House — What Is a Stigmatized Home?

When a North Carolina homeowner sold his 1,500-square-foot home for $195,900, one would assume his next door neighbor, whose house featured an identical floor-plan and an almost identical lot size and landscaping, would fetch a similar price. But when the second home was listed For Sale just a month later, it was priced far less. The reason? Well, the house was stigmatized.

Although the home showed pride of ownership, its walls had been a breeding ground for a toxic mold, the result of previous water leakage. In addition to replacing carpet and linoleum, cleaning air vents, bleaching the walls, and repainting, the homeowner was advised to list the house far below market value. His Realtor also told him to disclose the house’s history, warts and all.

Toxic mold is but one of many issues physical issues that can stigmatize a house, making it worth much less than its neighbors. Other possible stigmas include homes that have been the setting of a suicide or murder, a well known felony, accidental death, or even the suspected presence of ghosts. Consider the house featured in the movie Amityville Horror. It was a beautiful Victorian mansion, but who would be willing to pay for that property? Remember the movie Poltergeist and and the Sub-Division which was featured in the movie, supposedly built over an old burial ground! Bizarre circumstances may prejudice potential buyers, because stigmatized houses often represent psychological rather than physical issues. 

Stigmatized houses aren’t labeled as such in newspaper ads. Yellow police tape doesn’t distinguish them from their more innocent neighbors. So if you’re a buyer, one indication that a home is stigmatized is its super low price.

If you wonder why you're getting a steal, ask the seller, have your Buyers Agent ask the Listing Agent. In some cases, the price may be reduced just because the seller(s) want(s) a quick deal. If the issues are more complicated, however, the seller may be required to tell you only if asked, depending on disclosure laws in that particular state. For example, in North Carolina; Sellers inform Buyers of problems through the 'State of NC Residential Property & Owners Association Disclosure Statement' In the disclosure statement instructions, the seller must respond to the questions, but they are only obligated to disclose information about which they have actual knowledge. The Sellers and Purchasers of Real Estate in North Carolina are governed primarily by the old 'Common Law Legal Doctrine' of Caveat Emptor......meaning; "Let the Buyer Beware". So, except in cases involving fraud by the Seller or the Sellers Real Estate Agent, the Seller has no affirmative obligation to disclose information about the property being sold. The burden is placed on the Buyer to investigate the property. This may be accomplished through hiring a knowledgeable Real Estate Agent and licensed Inspectors before contracting to purchase that property.

State laws differ greatly on this issue because stigmas relate to real properties that reflect personal values and perceptions, matters difficult to legislate. Whether you are buying or selling, it will be worth your while to work with a Professional State Licensed Real Estate Agent who works directly for you and helps you to learn and understand your state's laws for disclosure.