Appraising Stigmatized Properties
Picture this: Your dream home, nice yard, great neighborhood, affordable, quiet neighbors; it’s truly more than you’d ever expect it to be. Your heart is racing, and you’re trying your hardest not to seem too eager in front of the real estate agent. That’s when it hits you. Why is this in my price range? Everything about this house points to a higher price point? What is wrong with
As your mind wanders, you’re having an easier time fighting off that “Where do I sign” voice, and now you’re asking questions. The real estate agent mentions that this is a stigmatized property, and that’s why the price is reduced.
Stigmatized property? What does that even mean, like Haunted?
Well yes and no. The topic of distressed properties is pretty controversial. But before we go any further, let’s define what a stigmatized property is. A stigmatized property is a property that buyers reject on grounds that are unrelated to its physical condition or features. There are six major types of property stigma, including:
Criminal: This type of property historically played a role in illegal activities. That includes former drug dens and chop shops, for example. The concern here is that some former visitors of the property could return and try to engage in illegal activity, which would probably be bad.
Murder/Suicide: Not all states agree on the disclosure of a home’s homicide or suicide history. For instance, in Florida the law states that you are not to disclose information in regard to deaths in the home in order to protect past owners. However, in California the data must be disclosed to new potential buyers.
Debt: Debt collectors are not aware that a debtor has moved out of the house, and may continue to pursue collection of the property. This could possibly result in harassment of the property’s new occupant.
Phenomena: Many areas require the disclosure of a “haunting” on a property. This stigma is usually restricted to local markets, because if not disclosed by agent only the local market would know about the haunting prior to the purchase.
Minimal: Minimal stigma is basically an intangible stigma that generally doesn’t have any explanation. An example of this is the unlikely ability to resell a property, though a lot of minimal stigmas tend to fall under locational issues such as neighborhood or odd land plot.
Depending on how you feel personally in respect to a stigma, you could possibly capitalize on others inability to overlook the intangibles. For instance, those who don’t believe in ghosts could buy a home with a phenomena stigma and save tens of thousands of dollars. They also have the potential to maximizing on tangible items like space and home quality. Whatever you choose, it’s always important to do your homework and make decisions that you know you will be able to live with.