What Is a Stigmatized Home?

Real Estate

What Is a Stigmatized Home?

When a California homeowner sold his 1,200-square-foot home for $210,000, one would assume his next door neighbor, whose house featured an identical floor plan and similar property, would fetch a similar price. But when the second home entered the market, only six weeks later, it was listed for far less. The reason? 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.

There are many issues that can stigmatize a house which will make home worth less than its neighbors.

Issues That May Stigmatize A Home:

1) Toxic or suspected organic matter  

2) Homes that have been the setting of a suicide or murder, felony, accidental death

3) Suspected presence of ghosts

Other bizarre circumstances can also prejudice potential buyers, because stigmatized houses often represent psychological rather than physical prejudices. 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?

Stigmatized houses aren’t labeled as such in newspaper ads. Yellow police tape doesn’t distinguish them from their more innocent neighbors.

Note -If the list price of a home is low - it may be an indication that the home could be stigmatized.  

If you are wondering why this house is priced at a steal, its best to ask your REALTOR to find out the reason(s). In some cases, the price may be reduced simply because the seller wants a quick deal. Other cases, the issues could be more complicated.  Keep in mind, the seller may be required to tell you only if asked, depending on disclosure laws in your state.

For example, in California, full disclosure is required; sellers need to inform buyers of problems even if they’re not specifically asked. Though, in Colorado, sellers must answer only direct inquiries.

Be aware that 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 learn your state's laws for disclosure.