Stigma???? What is That?

A word that is being tossed around in the Real Estate world more and more frequently is STIGMA. Thanks to the internet, Google and for some of us the good old dictionary… the definition can be found fairly easily but how does that apply to Real Estate?

According to the Real Estate Council of Ontario it is described as “In the context of real estate a “stigma” is a non-physical, intangible attribute of a property that may elicit psychological or emotional response on the part of a potential buyer. There may have been an event or circumstance that occurred in or near the property that does not affect the property’s appearance or function, but might be considered by some as emotionally disquieting. Unlike a latent or patent defect, which may exist at a property, there is nothing physically observable or measurable associated with a stigma.”

The last 20 or so years the most common “stigma” that was associated to Real Estate was the grow-op. Often there were patent and latent defects associated with a home that was once used as a grow-op. However, the stigma – or the non physical intangible attribute was the fact that the home was used for criminal purposes, perhaps other criminals still believe there is a grow-op at this address and the fear of the potential for further criminal activity on the property was not too farfetched. Clauses that asked Sellers to warrant and represent that their home was not a grow0op were and still are very common practice in real estate transactions.

The reality is that a STIGMA could come in multiple forms. Murders, suicides, even a natural death in a home could be a factor that would deter a Buyer from purchasing a property. The fact that any type of crime was committed on the property could impact a person’s decision to purchase the home. Maybe it’s a tale of ghosts and haunting! There could be a myriad of things that might affect a Buyer on an emotional level.

The scary part of the issue with a stigma is how does one determine what should be disclosed to a buyer? How is a homeowner supposed to know if there may be a “non-physical, intangible attribute of a property that may elicit a psychological or emotional response” to their property?

The question of what should be disclosed and why is a legal debate that is best left to lawyers, judges and politicians… ok lawyers and judges. However, for practical everyday business common sense would suggest that a realtor might want to ask their Buyer what might affect their buying decision. More often than not, a Realtor may ask what are you looking for? And the Buyer will rhyme off a litany of items: 4 big bedrooms, an inground pool, something close to a trail. Perhaps a small list of don’ts might come up. Example: I don’t want any carpet, or it can’t have an inground pool. But have you ever been asked if you would mind that the neighbours have claimed the house has been haunted for the past 50 years? And they say there are no dumb questions.