The real estate business is tricky, complex and sometimes murky. This is especially true when talking about stigmatising real estate – properties with stigma attached to them. Remember that one spooky house by the end of the lane that everybody warns you against buying? Or the building that was once an infamous crime scene? Well, these are simple examples of stigma properties. The stigma in real estate is that it’s not always visible. The blot lies not just in its appearance but also in its perception. This has left property sellers and buyers confused. While buyers hesitate to invest in such estates, sellers remain ambivalent about how much to tell a buyer and how much to restrain.
This blog discusses the various aspects of stigmatised real estate, how to deal with it and the possibilities of destigmatising real estate. Added bonus? It provides expert tips for buyers and sellers to help them deal with stigmatised properties in a smarter and better way.
What is Stigmatising Real Estate?
Simply speaking, a stigma property is a property that’s become less desirable because of a crime, death or any other negative event. These are also known as problem properties. The negative connotation attached to these properties dents their marketability and ultimately makes them difficult to deal with. Stigmas are broadly categorised into three groups:
Psychological or Pure Stigma
It refers to paranormal activity, crime, recurring deaths, or other events that may not affect the property’s physical appearance but directly impact its perception.
Physical Stigma
This pertains to problems related to the building’s physical appearance. These can include cracks in the structure, pest infestation, fire control issues, and radon gas.
Neighbourhood Stigma
It implies that a property is located in a controversial neighbourhood. Such areas may include high crime rates, proximity to graveyards, and other conditions.
Now that we’ve understood the stigmas of the real estate world, the question persists—what should we do when we encounter stigmatised real estate? Let’s look at the various possibilities of de-stigmatisation that lie in front of us.
Destigmatising Real Estate Properties Problem
The level of destigmatisation that can be achieved depends upon the stigma associated with a property. In case of a physical stigma, the seller can work around re-furnishing and improving the property. While for a neighbourhood stigma, one can request the authorities to help improve the overall livability of an area. However, not much can be done about something purely based on perception, as in the case of psychological stigmas. The fear around a supposed ‘haunted house’ will continue to loom despite endless assurance provided by the seller to a buyer.
Despite limited availability, certain tips can help buyers and sellers have complete information about a property and move forth with a greater perspective. Take a look:
Tips for Agents
The following are tips for agents and sellers when dealing with stigmatised properties –
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- Accept only reliable listings. Do not encourage sellers who are actively disclosing information.
- Use a Seller Property Information Statement (SPIS) to enquire about a property in detail before listing it.
- Enquire with the seller about their previous insurance claims on the property.
- Suggest professional property inspection to establish the property’s existing condition.
- If the seller doesn’t bring it up, raise pure, physical, and neighbourhood stigma concerns yourself.
Tips for Homebuyers
Here are tips for homebuyers when dealing with stigmatised properties –
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- Recommend a professional property inspection.
- Enquire about the insurance available in case of any mishap.
- Enquire for a copy of the Seller Property Information Statement (SPIS).
- Talk directly to the seller.
- Talk about the property’s reputation in the neighbourhood and the concerned authorities.
What Does the Law Say?
The law does not directly mandate a realtor to disclose a stigma associated with a property. However, it does establish certain ethical codes of conduct. For instance, Article 4 of the CREA Code and Rule 11 of the REGO Code require a realtor to discover and disclose facts about a property that could be relevant to the buyer’s final decision. The realtor might be held responsible for withholding relevant information under such laws. As a cautionary and ethical practice, realtors are advised to disclose all details associated with the property to a buyer. Further, the buyer will find out through the neighbours or word of mouth. Therefore, the best practice is to transparently discover and communicate the existing defects to the buyer. Another valuable tip from experts is to let your conscience guide you. Imagine yourself in the buyer’s shoes and consider if it’s information you’d want to know. This approach will give you the answer instantly.
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