Stigmatized Homes: What You Legally Have to Disclose When Selling
You know about staging and pricing a listing properly to attract buyers, but sometimes there’s an out-of-sight, out-of-mind history that sellers may not have disclosed. A property might look perfect on the outside, but if there was a death on site, it was used for illegal activity, or even if it’s reported to be haunted, it can become what’s known as “stigmatized.” This label can make the property more difficult to sell and might even bring down its value. Not to worry in Ontario as your not obligated to disclose this information. But how do you access this information if your curious and want to know when looking to buy?
Some potential buyers may not care about a home’s stigma, while others could perceive it as a red flag. However, depending where you live, sellers are not always obligated to disclose certain issues, leaving the onus on the buyer—with the help of their REALTOR®—to learn more.
We asked two real estate experts what buyers and sellers need to know about stigmatized homes.
What is a stigmatized home?
A property is designated “stigmatized” if it has an issue not related to its physical condition that could make it unattractive to buyers. Stigmas can include a major crime, death or suicide on the property, a house that was vandalized or reported as haunted, or a former grow-op that has been remediated, notes Murray Scotton, a REALTOR® in Calgary, Alberta.
“Everyone has a different tolerance level and that needs to be established,” says Scotton.
When do you need to disclose this information?
“In Alberta, there’s no requirement to disclose that a property is a stigmatized property,” says Kristian Tzenov, Regulatory Compliance Advisor with the Real Estate Council of Alberta, this is the same for us in Ontario.
Since stigmas can be subjective, it’s difficult to set clear rules on what constitutes one and when or if a possible stigma should be disclosed. In fact, Quebec is the only province that requires sellers to report if a person died an unnatural death on their property—it passed the law in 2012. In other jurisdictions like British Columbia and Ontario, there is no legislation that defines or regulates stigmatized properties.
“Each province has different rules about this so you should check with your REALTOR® for these details,” says Scotton. “Sellers should be asking about when and what to disclose—most REALTORS® will have this conversation with their seller about when and if something should be disclosed. Buyers should discuss what questions they want to ask about a property they’re interested in.”
Tzenov adds if a buyer asks a specific question to the seller’s REALTOR®, they’re obligated to tell the truth, or indicate their client has instructed them not to answer the question.
“So, buyers or their representatives should be actively asking the seller’s representative if the property has any stigmas. The seller’s rep will have to either answer truthfully or indicate their seller client has instructed them not to answer,” he says.
What do buyers need to know if they’re considering a stigmatized home?
Buyers who aren’t spooked at the prospect of making an offer on a haunted house may think there’s a chance to get a bargain on the price, says Tzenov.
“A stigmatized property is typically priced lower than comparable properties that aren’t stigmatized, but as with any property there’s the ability to negotiate,” he says, adding some buyers will avoid stigmatized properties, while others consider them good investments.
“It really depends on the buyer and their comfort level. One thing buyers should consider is how it might affect them when they go to sell the property.”
Ask lots of questions
Even if you live in a province that doesn’t have disclosure laws about stigmatized properties, sellers are typically required to disclose a home’s latent defects—that’s any major issue a professional home inspector wouldn’t have been able to see, such as mould, flood damage, or fire damage. Buyers should always inquire about the home’s history.
While one person’s stigma can be another person’s door to opportunity, it’s important to keep the lines of communication open. Your REALTOR® can help you navigate the process.
The article above is for information purposes and is not legal advice or a substitute for legal counsel. Sellers should review their provincial disclosure laws.