Just in time for Halloween, the Amityville Horror house is back on the market. Originally built in 1927, the home boasts of five bedrooms, a large boat house with a boat slip and a two car garage. It’s an impressive property if you can look beyond the home’s sullied past. I believe that most people would agree that home buying is stressful enough without the added concern of acquiring a spooky house. Stigmatized properties include all types of activity from murder/suicide to meth and crack houses. Properties tangled in major tragedy raise unique and difficult valuation problems and can stagnate marketability.
The National Association of Realtors defines stigmatized property as: "a property that has 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." In short, places of violent crimes are stigmatized because of the emotional impact left on the owners and the community. The value of a property will likely decrease, especially if the event was highly publicized like the condo where Nicole Brown Simpson lived or the Savopoulos Mansion in Washington D.C., site of a quadruple killing in May 2015. The Washington Post reported that the average home value in the mansion’s neighborhood was $6 million and the mansion sold for just over $3 million after being on the market less than a week. Despite the swift sale, residents are not likely to forget what happened there any time soon.
“A murder doesn’t just affect the price of the home where it occurred, it can also lower the value of neighboring houses,” according to Money Talks News. A recent article written in The U.S. News & World Report notes that homicides cost the U.S. housing market an estimated $2.3 billion in property devaluation. In addition to taking a hit in value, stigmatized properties have been found to stay on the market about 45 percent longer as opposed to comparable properties, and sell for about 3 percent less, as reported by the Daily Real Estate news.
Stigmatized property expert Randall Bell, affectionately dubbed the “Master of Disaster,” works as an advisor in diminution value for these types of properties. In a video for the Appraisal Institute, he explains that when it comes to valuing these properties, the basics of finding comparable studies for normal properties also applies to stigmatized properties. The methodologies are similar, except instead of using comparable sales in the surrounding neighborhood, he may research “comps” using similar homes or disaster areas found throughout the country or around the world. Bell told Realtor Mag, “there is usually a 15-to-25 percent diminution in value for 2 or 3 years” after the event, which then diminishes over a 10-to-25-year period.
The impact of mere rumors of haunted houses is also difficult to value. We’re not talking about media sensationalized killings, but homes with reputations of ghostly squatters, like the Lalaurie House in New Orleans. It’s probably safe to assume that sellers will keep any knowledge of spiritual encounters close to the chest. In many states, sellers are not required to disclose parapsychological or supernatural phenomenon. Appraisers will have a difficult task determining how much the presence of a ghost devalues the property since you can’t really prove the ghost’s existence. So, who you gonna call? As always, buyers BEWARE….and happy house haunting….er, uh hunting.
Continue the discussion on LinkedIn: What would you consider a proper discount for a murder house? Is a ghost rumor a deal breaker for you?
For more information about state tax issues, sign up for a free trial on Bloomberg BNA’s Premier State Tax Library.
By Cynthia N. Wells
Notify me when updates are available (No standing order will be created).
Put me on standing order
Notify me when new releases are available (no standing order will be created)