In the article Do you see dead people? Disclose it [Realty Times] Most states’s disclosure laws don’t deal with the forms the deceased take in the afterlife, but they do address death as a stigma. The one exception is death caused by AIDS. Federal law define’s AIDS as a disability and such a disclosure could be deemed discriminatory.
Randall Bell, founder of Laguna Beach, CA-based Bell Consulting, which analyzes the impact of detrimental conditions on property values, says secrecy about specters and other conditions only adds to the fear. Public disclosure has a cathartic effect that helps remove any shroud of secrecy
I have spoken to appraisers around the country on this issue and I have been told some stories of tragedies in houses that have made my skin crawl. Its hard to believe that a buyer, after being told some of these stories, would not apply some sort of discount to the value. The difficult lies with supporting such an adjustment as an appraiser since these incidents (hopefully) occur few and far in between.
In a similarly titled article in Valuation Review About 30 states have specific laws on the books saying that agents and sellers cannot be held liable for not disclosing such nonmaterial, or nonphysical, “defects” about a house.
Depending on the status of the current real estate market, the stigma would fluctuate. It is unlikely that a murder or suicide, or rumors of a haunting in a house would not have an affect on the market value of the property. The Scott Peterson house sold quickly last year, but that may be due to the fact that the murder did not occur within the home and that the housing market at the time was very short of inventory.
In the late 1980’s we were familiar with a house in Manhattan where the owner murdered his family. This incident was discussed in the local broker listings and it was our feeling that the value was impacted by about 10% at the time. That discount may or may not be relevant today.
We have seen stigma adjustments quoted by other experts in other markets be as high as 30%. Quite often, the property is torn down and the land becomes the true asset in the transaction.