Take the Boca Raton, Fla., home where a distraught mother killed her daughter, gravely wounded her son and then committed suicide in the master bedroom in 1987. The $270,000 home was sold a year later to Arne and Corinne Roslund who did not learn of the gruesome happening until after they moved in.
The Roslunds abandoned the property in 1991 and sued Coldwell Banker, the listing agent for the property, alleging that "the shooting, killing and suicide which occurred at the property constituted facts which materially affected the (home's) value."
The couple won a settlement in the case earlier this year in which Coldwell Banker bought back the property.
The suit's settlement allowed the Roslunds to recoup some of their $80,000 in down payment and improvements to the property, but most went to pay legal fees.
Arne Roslund said that the house had no physical defects but that the stigma of the crime would never go away.
COURTS PROTECTING BUYERS
All this over bad vibes?
Psychological stigmas can have as much impact on a property's value as physical defects - a fact the courts have recognized in several recent cases.
In the most recent, a New York state appellate court held that a buyer could rescind his agreement to buy a $650,000 house in Nyack, N.Y., because the seller and the real estate broker failed to unshroud the alleged ghost until after the agreement of sale was signed.
Always on the cutting edge of trendiness is California, which 10 years ago, permitted the buyers to back out of a deal because the seller hadn't told them that a mother and her five children had been slaughtered in the house a decade before.
As a result, in 1987 California passed a law allowing buyers to sue if sellers fail to disclose all deaths on a property if they occurred within the three years prior to the property's being put on the market. However, in such cases the buyers must still show thatthe stigma of the death lessened the property's value.
The rule of caveat emptor (buyer beware) still holds true in Pennsylvania where there are no laws regarding the disclosure of non-material defects, said Harvey Levin, chairman of the Pennsylvania Real Estate Commission.
Levin said the commission, which oversees the licensing of real estate agents, also has no firm policy regarding stigmatized properties.
However, the commission recommends that its licensees "disclose anything that could impact on value and marketability of a property. But not to disclose may not be a violation of applicable law," Levin added.
If a complaint involving the issue should come before the commission, Levin said the members would look for "outright misrepresentation" by the agent, which is covered by the law.
There is one psychological stigma that is not subject to disclosure. It is a violation of federal and local fair housing laws to disclose that a property has been inhabited by someone with AIDS, Levin said.
But in all other instances, it is always a good idea to come clean, he added.
Even a frivolous lawsuit could cost thousands of dollars in legal fees, and there's no guarantee that a Pennsylvania court won't reach out and apply the spirit of the law to protect the homebuyer.
SOME UNFAZED BY GHOSTS
When there is something unusual about a property, "my practice, as a rule of thumb, is to always disclose, disclose, disclose," said Allan Domb, one of the city's most successful real estate brokers.
"I put myself in the shoes of the buyer. If it is something that would materially affect my well-being, I would feel it necessary to tell them about it."
But real estate agents walk a thin line between disclosure and violation of a seller's privacy.
"You should always make sure what you're going to disclose has been confirmed in writing to the seller," Domb said.
If a seller is reluctant to disclose the information to potential buyers, then the agent must decide whether to take the risk of future problems.
"My advice would be to walk away because it will be a problem," Domb said.
Such information doesn't always have a negative impact. One person's stigma may have no effect on another customer.
A Chestnut Hill real estate agent who was responsible for selling a home that had been the scene of a triple-murder and suicide in 1989 said the house sold within a "normal time span given the market," and pretty near its market value.
The house had belonged to Dr. Richard Paul, who killed his wife, son and brain-damaged daughter by lethal injection before taking his own life.
The agent, who did not want to be named, said she had included a notation in the Multiple Listing Service that any agent showing the house first contact her.
"I'd always ask if they knew the history of the house. If they didn't, I'd tell them," she said. "I'd also insist that they tell their customers the details before they formed a substantial interest in the property."
While the tragic story may have discouraged some people from looking at the house, it was "not the horrendous obstacle I had expected to be," she said.
SOME LAWYERLY ADVICE
The Delaware Valley also has a number of homes that are reportedly haunted. This may enhance the attraction of a historic or museum property, but it can be the bane of an ordinary seller's existence.
Bucks County Realtor Ellen Cassidy recalls her excitement at selling a Revolutionary War-era home in Langhorne, Bucks County, that had been on the market for two years.
"I just assumed the house had been on the market that long because it was in poor shape," said Cassidy, a sales agent with RE/
MAX Realty Services.
On her way back through Langhorne, she stopped to visit a fellow real estate agent to tell him the good news.
Instead of excitement at her coup, "a strange look came over his face, and he told me the house was haunted," Cassidy said.
Cassidy said she immediately called the listing agent to confirm the story. She found out it was well-known around Langhorne that the house was haunted by the ghost of Pierson Mitchell, an early owner of the property. The house was even included in "Ghosts in the Valley," a book about supernatural events in the Delaware Valley.
Cassidy had a serious problem. If she told her clients what she knew, would it kill the deal? Could a resident ghost be considered a material defect?
"I remembered reading an article in 'Real Estate Today' about a court case involving a similar situation, so I asked my attorney for advice," Cassidy said.
Even though the law did not require her to do so, he advised her to disclose.
Cassidy called her buyers with the story. Surprisingly, the couple took the news with equanimity. The husband already had experienced what he described as a "spiritual presence" when looking at the house and had told his wife. They had decided it didn't make a difference.
They went ahead and bought the house on a lease-purchase agreement that included a clause that states: "Buyer is aware that there are published reports of spirit activity (ghosts) in the house and on the property in years past."
Said Cassidy: "Whenever you are in doubt, disclose. By doing so, everyone involved is aware of the situation, you will be protected, and the transaction will not come back to haunt you."