What Do You Mean, My House is Haunted?

February 28, 2012

Buyers want to make an informed decision when they purchase a house because their home is where they spend most of their time. Unfortunately, it is impossible to know the entire history of any particular property. Unwelcome "surprises" may lurk behind walls or under carpets and remain undiscovered until remodeling time. That is why looking over the seller’s disclosure statement, ordering a property inspection and obtaining title insurance are such important steps in the home buying process.

Buyers use all of their senses in choosing a property. The first step while walking through the home is to look for problems. Smelling mold or smoke can deter some homebuyers, as can feeling extreme dampness in the air or hearing floors and windows rattle in the wind. All of this can help, but what about the sixth sense?

Very few people want to buy a house that is supposedly "haunted." (Yes, there are some who consider supernatural activity a selling point; see Haunted Real Estate is Scary Good Investment.) Realtors know that homes adjacent to cemeteries, on top of ancient burial ground or with disturbing histories, otherwise known as stigmatized properties, can be difficult to sell. In Pennsylvania, a three judge panel of the Superior Court recently decided that a jury may determine if a home seller is required to disclose a murder/suicide as a substantial defect in a home.

In the case Milliken v. Jacono, the purchaser sued the seller and the real estate agents for fraud and misrepresentation when, three weeks after closing, she learned that a previous owner had allegedly killed his wife and himself in the property. After this discovery, she stated that she would not have bought the house had she known about the crime. This led to the question of whether a murder/suicide falls under Pennsylvania’s disclosure law, which requires sellers to disclose any material defect on a property, or anything that "would have a significant adverse impact on the value of the residential real property or that involves reasonable risk to people on the land."

In a two to one decision, the majority of the panel decided that the murder/suicide could be a material defect in the property requiring disclosure. A significant factor in the majority’s opinion was that the seller and agents made numerous inquiries to determine if they were required to disclose the killings. The Court found that a jury could decide if this event was a material defect in the property.

A dissenting opinion stated that the seller should only be required to disclose the physical condition of the property, any legal impairment to the property and any hazardous material on the property. Pointing out that psychological effects will vary greatly from person to person and questioning whether or not disclosure is limited only to murder/suicide, the dissent stated that requiring disclosure of psychological defects would be a descent down a very slippery slope.

Whether a jury determines a murder/suicide to be a defect or not, there are things both sellers and purchasers can do to protect themselves. Besides doing a simple Google search of an address or previous owner (which probably would have helped the buyer in Milliken v. Jacono), buyers can refer to online resources such as Buying a Real Haunted House and Buyers Beware: Was That House a Crime Scene? For sellers and realtors, the National Association of Realtors’ Field Guide to Dealing With Stigmatized Properties provides links and advice regarding these types of properties, including disclosure issues. On both sides of the table, consulting an attorney to help navigate the complex world of real estate law will provide the ultimate protection in any transaction.

Craig Russell is an attorney at Russell, Krafft & Gruber, LLP in Lancaster, Pennsylvania. He received his law degree from Temple University and has been practicing in the area of real estate law, both commercial and residential, for over 40 years.