The Purchase of Stigmatized Homes: Let the Buyer Beware!

A client recently asked whether he must disclose to the buyer of his home the fact that the next-door neighbor is a registered sex offender. I was able to tell my client that Michigan does not require that he disclose his neighbor’s status. Rather, our state puts the onus on buyers to investigate whether a home they are considering purchasing may be uncomfortably near someone listed on the Sex Offender Registry.

Michigan does require disclosure of a number of details about a home, most of which have to do with its physical condition. It does not, however, require the disclosure of non-physical defects that might not affect a home’s value, but which might have a fear-inducing or psychological impact on a buyer. These would include not only proximity to a registered sex offender, but also the occurrence of stigmatizing events like a violent death or suicide onsite, or even a reputation for being haunted.

Why does Michigan take such a stand? In part, it is because what may be a deal breaker for some buyers may actually an attractant for others. (Some people love the notion of a haunted house!) Further, a stigmatizing event might make a buyer uncomfortable, but there’s no way to know whether that same event would have any negative effect on the buyer’s ability to resell the home at a nice profit. (In other words, no harm, no foul.)

So, what should a seller disclose? It depends. Most sellers will choose to say only what the law requires. Others will feel a moral obligation to disclose more information if they believe the stigmatizing event carries a risk to the buyer (for example, the proximity of a sex offender). Still others will err on the side of over-disclosure in order to avoid the possibility of a post-closing lawsuit from a surprised and unhappy buyer. In all cases, good legal counsel can help you reach a decision that reflects both the law and your values and takes into account the relevant risks.