Buyer Beware: Was Your Home Once a Crime Scene?

March 17, 2009 — -- What if your dream home was once the scene of a gruesome murder?

One Minnesota couple faced that dilemma firsthand when just days after moving into their new home neighbors told them that the previous owner had shot and killed his wife there.

Spooked and angry that the agent who sold them the house had not told them about the crime, the couple is now suing the realty company. They are seeking $100,000 for emotional distress and what they see as the decreased value of their home, according to court documents obtained by ABC News.

While this couple may benefit from a Minnesota law requiring brokers to tell buyers about crimes that have occurred in a home, not all buyers have that advantage, according to several real estate experts.

Laws concerning stigmatized properties -- the industry's term to describe homes that have been the scene of a suicide, murder, an AIDS-related death or even paranormal activity -- vary from state to state.

Experts advise that homeowners who would be opposed to living in a home that was once the scene of a violent crime do thorough research before making an offer on a property and veer away from relying on brokers to volunteer the information.

"What sellers and real estate agents have to tell buyers depends on where you are," said Ralph Holmen, the associate general counselor for the National Association of Realtors. "The general rule is that they must disclose material adverse defects, such as a chronic leak or damage to the siding of the house."

"It's a question as to whether [a murder at the home] would be considered a material or adverse defect to the property," said Holmen.

How to Make Sure You're Don't End Up With a Haunted House

Karen Sonn, a New York-based real estate lawyer at Sonn & Associates, said that she has dealt with several clients who were "completely freaked out" to learn that a deadly crime or a suicide had occurred in the home they wanted to buy.

"I knew a couple who sold their house because they found out after they moved that a suicide had occurred there in the past," said Sonn.

"They were freaked out," said Sonn. "They were having kids, and they said they just felt bad karma."

"People have visceral reactions to this stuff," she said.

Phil Immel, a licensed real estate broker and self-professed real estate guru, told ABCNews.com that there are several easy things potential homeowners can do to protect themselves from such a situation.

"Definitely Google the address or the city and look for it under crimes that have been recorded by the Police Department or written about in newspaper articles," suggested Immel. "If you're really serious about a house, go walk around the neighborhood and ask the neighbors if there is anything interesting you should know about the property."

Immel also suggested people do an Internet search for the particular state's required disclosure laws so that they know exactly what is required of their broker and what can be withheld from buyers by law.

In California, where Immel is based, the law required brokers to inform buyers of crimes that have occurred at homes within three years of the purchase.

Does a Home's Criminal History Lower Its Value?

The value of a stigmatized home will decrease, according to Immel, depending on the nature of the incident that occurred there.

In high-profile cases, for example, Immel recalls hundreds of thousands of dollars being slashed from the asking price because of a crime that occurred at the home.

After Nicole Brown and her friend Ron Goldman were stabbed to death at Brown's Brentwood, Calif., home in 1994, the property sat on the market for more than two years waiting for a buyer.

The home eventually sold for $200,000 less than what Brown had originally paid for it.

"If the murder was infamous, the property value could certainly go down," said the NAR's Helmon. "That creepy feeling will have an adverse effect on the value of the home."

Immel said that in the case of the San Diego mansion where 39 members of the Heaven's Gate cult killed themselves, the price of the property declined as much as 50 percent when it was resold.

"The price depends on the severity of the stigmatization," said Immel. "Murder would seem to be horrific and would garner a 50 percent reduction, whereas a landslide on the property might be more toward 30 percent."

If the event that an elderly person died at the home from natural causes, Immel said it's unlikely to detract from the value of the home.

While homeowners may assume that they would have heard about a murder that took place at a specific home or in a neighborhood, or may count on their broker to inform them of one, Immel advises buyers to err on the side of caution.

"Because these disclosure laws regarding stigmatized homes vary from state to state," said Phil Immel, a California real estate broker. "Be a proactive consumer and ask lots of questions.

"You don't want to live in a haunted house, do you?"