Ghost stories make for fun reading, but if you're selling a property some people believe is haunted, they can raise a real question.
If you have a property that’s considered haunted, do you need to disclose this information to potential buyers? Though it may seem silly to even ask such a question in this era, it’s a surprisingly important question from a legal standpoint.
It’s an unfortunate fact that most haunted houses stay on the market for longer and sell for lower than market value but it’s hard to blame potential buyers. Would you want to live in a haunted house?
Disclosure rules differ from state to state, and in some cases a reputation like this may need to be disclosed. One reason is that the property may be considered “stigmatized.”
What is Stigmatized Property?
For a property to be considered stigmatized, it must have been “psychologically impacted by an event, which occurred or was suspected to have occurred on the property, such event being one that has no physical impact of any kind.” Though there are many types of stigmatized properties, in the context of haunting, this event (or suspected event) can range from the property functioning as the site of paranormal occurrences, to suicides, or even murders.
What is a Material Fact and is Haunting an Example of One?
In real estate, a material fact is a piece of information which could cause a buyer to make a different decision about their offer price or ultimately buying than if it were not disclosed. In other words, in real estate, a material fact is something that might make you change your mind about whether or not you want to buy a property, or if you still do, how much you are willing to pay for it.
What about in Iowa?
In some states, the seller is only responsible to disclose material facts to a potential purchaser. Iowa's disclosure law asks for more. Iowa Code section 558A.4 requires the seller's disclosure statement to include “information relating to the condition and important characteristics of the property and structures located on the property,” as spelled out in Iowa Real Estate Commission rules that set the minimum topics the form must cover. Those rules don't limit a seller to only those items.
A good rule of thumb is to disclose EVERYTHING you have knowledge of, even if you have previously repaired the item. This allows the potential buyer to investigate further into disclosed conditions and have a more complete understanding regarding the condition of the property they are purchasing.
Whether a haunting counts as a material fact has no easy answer. Iowa's disclosure law is broader than a material-facts-only rule, though, so if you know of something that could affect a buyer's view of your property, disclosing it is generally the safer course. Talk with an attorney about your situation.
If you are hoping to sell a stigmatized property in the near future, it can be a bit tricky to navigate the process of what you are required to disclose and what you are not. Need help? Reach out to our real estate law experts at Danilson Law for a consultation. Call us today at (515)512-5500.