Stigmatized Property: True Crime, Real Estate, and Why Psychic Damage Can Create Great Deals | Asset Protection for Real Estate Investors : Royal Legal Solutions

Stigmatized Property: True Crime, Real Estate, and Why Psychic Damage Can Create Great Deals

It’s always sad to see stories of cult and popular figures alike passing away in their homes. In March of 2019 alone, legendary California tattoo artist Lyle Tuttle, former Alaskan governor Keith Miller, and many lesser-known humble heroes whose names won’t make papers died at home. But have you ever wondered what becomes of homes associated with famous deaths?

What is a Stigmatized Property?

The phenomenon of property stigmatization is also known as “psychic damage.” It has nothing to do with the actual physical condition of the property in question. Psychic damage and stigma refer to far more subjective issues that may relate to beliefs about energy and “bad vibes.”

A common example of this type of damage is a home where a violent crime or suicide has taken place in the past. The former home of O.J. Simpson, where the controversial murder of Nicole Brown and another innocent took place, was one of the most notable stigmatized properties of the 1990s. While such homes occasionally rise in value for their infamy, this beautiful scene of an unforgettably brutal crime ultimately sold for under market value. According to the property’s appraiser Andrew Bell, who has handled many stigmatized properties including the home of JonBenet Ramsey, a crime will typically decrease the value of a property by 15-20%.

Crime isn’t the only cause of property stigma. Homes that were the scenes of suicides, natural deaths, notable accidents, or even homes tenants insist are haunted may be stigmatized too.

Do Homeowners Have to Disclose if a Crime Has Taken Place on a Property?

The answer depends on your state. Some states require owners to disclose many situations that could be stigmatizing, while others don’t require a disclosure at all. A competent attorney can explain state and local laws that apply to you.

Non-criminal events tend to be less legislated. But some jurisdictions may require the seller of a home to disclose tenant reports of hauntings, for example. Fortunately, we cannot be held legally liable for the actions of spirits and otherworldly beings that may hypothetically inhabit our properties.

Stigmatized Property Can Be an Investment Opportunity

The misfortune of the seller of a stigmatized property can often be the smart investor’s gain. Some investors explicitly seek out stigmatized property. Frankly, many people simply don’t care about a sordid history. What makes a home unlivable for the family looking for their first property may not even faze the investor. The subjective nature of stigmatized property can absolutely be exploited if you are willing to be open-minded, proactive and creative.

You can often find incredible deals on property with psychic damage of some type. You might even be able to find a steal in a state that requires disclosure of these incidents. A little bit of common sense goes a long way. The severity of the event, how long ago it occurred, whether it’s ongoing, and the fact that time can lessen the impact of tragic situations are all factors to consider. You may be pleasantly surprised by how motivated the sellers of these properties can be, but be sure to treat them with empathy and kindness. These sellers may have experienced a traumatic event themselves, after all.

If you’re considering purchasing such a property, it’s a good idea to speak with a qualified real estate attorney. You’ll want a lawyer’s opinion about whether you’ll have to make disclosures in the future, the legal requirements in your jurisdiction, and any other questions you have. This is true whether you’re in the buying or selling position.

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