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The Haunted House Disclosure Dilema
By John Stemlar, Sage Real Estate Advisors
Every now and then someone asks whether a seller is required to disclose to a prospective homebuyer that a house is haunted. OK… no one really ever asks that, but it is a fun Halloween topic.
Seller disclosure laws vary from state to state. Georgia adopts a caveat emptor (“buyer beware”) standard. Georgia, however, DOES require known latent property defects to be disclosed to a prospective homebuyer. A defect is an adverse condition (e.g., a crumbling foundation) that a reasonable buyer would consider in a purchase decision. A defect is latent if a buyer could not reasonably be expected to discover it in a diligent investigation of the property (e.g., a crumbling foundation behind finished wall). The disclosure requirement applies to physical attributes of the property and its surrounding area, but has not been applied with respect to a stigmatized property (like a murder scene or a haunting).
Georgia separately addresses the question of whether a death on the property must be disclosed. Georgia statutes require sellers and agents to disclose to a prospective buyer that the home was the site of a homicide, suicide or accidental death, but ONLY if asked. So, what about hauntings? It remains an unanswered question in Georgia and in most states, and it’s easy to understand why. Laws and court decisions requiring such disclosures would necessarily put legislatures and judges on record as believing in ghosts.
There is an interesting case in New York that deals with the haunting issue. Stambovsky v. Ackley involved an out of town buyer of an old Victorian mansion who, prior to closing, heard rumors of the home being haunted. Interestingly, the seller was the source of the home’s local reputation as a haunted house. The seller freely, publicly and regularly reported ghostly apparitions over the course of several years, clearly enjoying the home’s local notoriety.
The court recognized that the mere stigma of a home being haunted could adversely impact its value. In addition, the court held that the seller, having perpetuated the rumor of the home being haunted, could not now deny the haunting – in other words, for purposes of this case, ghosts do exist. The court allowed the buyer to rescind the contract in the “spirit of equity” based on the seller failing to disclose the haunting.