‘Stigmatized’ Properties and What REALTORS® Should Know About Disclosure

You have a great house to sell. It’s in a great neighbourhood, it’s an attractive offering and it’s poised to draw a lot of attention.

There’s a nagging problem, though. Given that it may be considered a stigmatized property, the attention it brings may not be the kind you’re seeking. Depending on who wants to buy the property, it can be a major problem or no problem at all. Potential buyers will all have different backgrounds, values and perceptions which will impact how they view the significance of a potential stigma.

What is a stigmatized property? A stigma can have many meanings, but for our purposes we’re talking about an intangible, non-physical attribute that could elicit an emotional or psychological response from a potential buyer. Stigmas can include if a property was the scene of a crime, if it was owned by a notorious individual, if it was used as a former grow-op, or a suspected haunting. It’s important to note stigmas have nothing to do with the physical condition or features of a property.

Murder, death, fear of hauntings, or sensitivities such as the house address number can all be potential red flags for particular buyers.

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So, what are REALTORS® and sellers required to disclose if they know something about a house that may make it be considered a stigmatized property?

It could be considered troublesome from an ethical point of view but the law is clear, says Barry Lebow, a REALTOR® and broker in Toronto. Lebow is also an appraiser and a self-proclaimed expert on stigmatized properties, having been a witness in court cases across Canada. Lebow explains nowhere in Canada other than Quebec does a formal law require sellers to disclose property stigma (in Quebec, it’s “the presence of an unexplained phenomenon”) to potential buyers.

Always double check your province’s disclosure laws! Typically, sellers are required to disclose latent defects—serious issues which could not have been reasonably observed during a traditional home inspection—to potential buyers, such as flood damage or mould.

“Even so, though it is not necessarily a law, it is good business practice for the seller and the REALTOR® to disclose what they know,” says Lebow. “Whether it is, say, a murder or otherwise, it is better to be forthcoming and get it out there rather than have a buyer finding out after the fact. Unless the seller lives in a vacuum, neighbours will talk or a simple Google search will reveal the truth. For both sellers and REALTORS®, there can still be the potential for a lawsuit down the road if they do not disclose what they know.”

So, a primary rule when selling a stigmatized property is disclose, disclose, disclose. There’s no single, unifying definition of what a stigmatized property is across Canada and that clouds how to market it. So, a second rule to consider is ensuring you do your homework.

Know as much about the property and its past as you can reasonably determine. That could entail some digging for information within your MLS® System, online or in other administrative records and ensuring you get necessary information from the seller.

Seek guidance where possible

In terms of where various provincial real estate regulators land on the issue of stigmatized properties and their recommendations to REALTORS®, it’s wise to contact a representative or check their website for guidance on issues that can include perspectives on ethics.

While a stigmatized property may raise a red flag in a buyer’s mind that can cause them to run the other way, for some buyers, that red flag simply screams bargain.

“When it comes to the buyer, your stigma is not necessarily my stigma,” says Lebow, adding he has dealt with about 300 cases of stigmatized properties in a real estate career that spans decades. “No matter how stigmatized the property may be, with the rarest of exceptions, there will eventually be a buyer. People most often want to buy a bigger house or be in a better neighbourhood and stigma will not stop them, especially when the price comes down to their level.”

Understanding other perspectives

For Edmonton broker and REALTOR® Lorri Brewer, selling a stigmatized home is a very personal experience, informed by her own near-death experience which she says has made her much more spiritually attuned, becoming more sensitive to the energies of the property and her clients.

More than 10 years ago she walked her buyer into a home and “she felt something bad. Right away she picked up on it. But the other REALTOR® hadn’t told me the history,” she said.

It turns out that there had been a murder in the house. Brewer later learned the house sold for about $50,000 less than market value after price reductions. “What can happen with these properties is an investor buys it, cleans, it, turns it into a rental and any energy in the house remains.”

Other REALTORS® who have had problems dealing with stigmatized properties have reached out to Brewer for help, she says, and she’s willing to guide them, when and if she can. Like Lebow, her main advice to a REALTOR® selling such a property is to “disclose, disclose, disclose.”

Keep communications open and honest

While the onus is typically on the buyer to pose questions about the property, the seller, or their REALTOR® should respond openly and honestly to any questions about a specific stigma, if they know about it.

In Nova Scotia, while sellers and REALTORS® aren’t legally bound to disclose, the Nova Scotia Real Estate Commission recommends buyers be up front about concerns involving stigmas.

Halifax-base salesperson and REALTOR® Sandra Pike says that, as a buyer’s agent, she always requests the seller’s agent disclose whether the property has been stigmatized, and she always Googles the property.

During a hot market when demand is high, it might not be as important as it otherwise would be to buyers.

Remember, a stigma is often a matter of perspective and may not matter to some buyers, but if you’re open and honest in your communication and do your due diligence you’ll be able to help your clients navigate buying or selling a stigmatized property.

Have you ever sold a stigmatized property? Tell us about your experience in the Comments below.

The article above is for information purposes and is not legal advice or a substitute for legal counsel.

The CREA Café team is responsible for the official blog of The Canadian Real Estate Association (CREA). The CREA Café is a cozy place for CREA to connect with our valued members and friends by sharing our thoughts and insights over a virtual cup of coffee.

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