On the House: After disaster or crime, give property recovery time

A Virginia crime scene: Public reaction to a crime will affect value, but time changes minds.
A Virginia crime scene: Public reaction to a crime will affect value, but time changes minds. (Bloomberg News)
Posted: June 15, 2014

Randall Bell and I crossed paths about 11 years ago in San Diego, when he was a guest speaker for breakfast at a real estate conference I was attending.

If the name - forgive me - doesn't ring a bell, this is the man known as the "Master of Disaster," called in by owners of properties where terrible events have occurred to determine their effects on the properties' value.

According to Bell, he has a nuclear pellet in a bookcase at his Laguna Beach, Calif., office that makes his secretary nervous, and a photo of his children flanked by pictures of a pipeline explosion and the Chernobyl disaster.

He also dresses up in a protective suit at Halloween and uses a Geiger counter to scare the kids in the neighborhood.

I hadn't thought about Bell since I wrote about our encounter in June 2003. But he recently spoke to the Counselors of Real Estate in Chicago, and what he said should provide comfort to property owners dealing with more mundane, if unanticipated, problems.

"Don't panic, and be patient," Bell counseled. "In most cases, stigmatized properties will sell at a discount."

Value will vary based on the nature of the damage, when it occurred, and even the attitudes of neighbors and others.

The magnitude of the damage or public reaction to a crime committed will greatly affect value. The most publicized natural disasters and the most heinous crimes generally will create the greatest market resistance, and thus devalue a property most.

Typically, Bell said, property owners should expect devaluation of 10 percent to 30 percent, but time can change public perception, and some properties can even sell at market value if enough years have passed.

There doesn't appear to be a hard-and-fast rule attached to this, Bell told me back in 2003.

"Just as the study of real estate is not of buildings as inanimate objects, the study of real estate damages is one of people," he said. "What's important is the behavior-management styles of the people behind the situations."

As an example of how notoriety and local attitudes can play a significant role in determining value, Bell cited the rented home in which actress Sharon Tate was murdered in 1969.

Shortly after the murder, the property owner, Rudi Altobelli, moved back into the house and lived there for two decades, Bell said.

Over time, the property's stigma diminished, and the owner eventually sold it in 1994 at full market value, Bell said. (At the time, Altobelli said the price was $1.6 million.)

The new owner razed the house - built for a French actress and once rented by Cary Grant - constructed a Mediterranean-style mansion, and changed the address.

Like the Cowardly Lion, it seems some do believe in ghosts.

Sometimes, property owners create their own value-slashing situations. Complain about things enough, and the neighbors tend to remember when prospective buyers come around, so be careful with whom you share the bad stuff.

In the case of any disaster or land contamination, Bell said, when considering a property's sale price, consider this: If it costs more to fix the damage than the property is worth, don't fix it.

Bell told me back in San Diego that he had studied just about every human-caused environmental disaster and had seen the same mistakes made over and over again.

"I continue to see people building shopping centers in floodplains and houses on and below hillsides," he said.

Or, as we on the East Coast call it, California.


aheavens@phillynews.com

215-854-2472 @alheavens

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