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This Halloween, REB delves deep into the concept of stigmatised property and what agents must disclose to buyers.
New listing: a charming three-bedroom, two-bathroom Victorian terrace with a sunny backyard – and a troubled past marked by an unexplained death and reports of a lingering presence agents can’t ignore.
In real estate, a stigmatised property refers to a home with a disturbing, tragic, or otherwise undesirable event in its history that can deter buyers.
Even if a property is physically flawless, past tragedies or notoriety, whether widely mediated or not, can create a lasting stigma that deters buyers and complicates sales.
What makes a property stigmatised varies widely, as it depends on how potential buyers perceive its past.
Factors that can make a stigmatised property include violent crimes, murders, suicides, drug-related incidents, domestic violence, rumours of paranormal activity, or previous residents with a notorious reputation or financial troubles.
According to R&W Potts Point/Elizabeth Bay principal Greg McKinley, while some stigmatised properties make headlines, they aren’t as common and have to be sold like any other deceased estate, with full disclosure.
“There's no different trick to it. Yes, some properties have a more publicised thing to it, but it doesn't take away from the fact of exactly what it is: a deceased estate,” McKinley told REB.
“Real estate agents come across deceased estates continually in their jobs; it's a normal part of our profession to deal with those things.”
While disclosure rules vary across Australia, under the Federal Australian Consumer Law, vendors and agents must not engage in misleading or deceptive conduct, as they risk legal repercussions.
State laws in Victoria and NSW also require agents to disclose “material facts”, including disturbing events that could influence a buyer’s decision.
“You don't have to post it on the ad that this is a property of that, but you do have to disclose,” McKinley said.
Under the law, failure to do so can lead to significant penalties for real estate agents.
In 2004, two NSW agents were fined for failing to disclose that a property was the site of a triple murder, which a Buddhist couple argued could have influenced their decision to buy.
The couple stated that if they had been aware of the incident on the property, they would not have entered into the contract.
In contrast, in 2010, a Victorian buyer of vacant land sued a seller for not disclosing a suicide on the property, but the court dismissed the claim, ruling the suicide was not a “material fact” as the buyer still proceeded with the contract after learning of it.
A couple of years ago, McKinley had to sell a stigmatised property in Surry Hills that had attracted significant media attention for its darker history.
McKinley said that while agents ultimately have to disclose the property's past, not everyone who walks through is a serious buyer; many are simply browsing or exploring options.
“It isn’t necessary, or practical, to discuss past issues or the previous owner with every visitor, as only those genuinely interested in the property need that level of detail.”
He said that disclosure either occurs in writing to contract holders or before a conversation with genuinely interested buyers.
“I have to tell them the reason that this property is on the market, or the fact that there has been something unusual that has happened within the property.”
According to McKinley, buyers' reactions to a property's history depend on their beliefs.
“People have different opinions on how they emotionally feel about that. For some, if it's been a long time, they have no concerns whatsoever and are happy to proceed on a normal basis. Others care more.”
“It just needs to be disclosed to them what the situation of the property is.”
While McKinley said agents must remain lawful, he urged people to remember that some of the homes sold in Australia are over 200 years old and are bound to have history.
“If you look at terraces in Paddington, they were built between 1880 and 1900. There have been all sorts of activities going through these properties over the last hundred to 150 years."
“It's impossible to know the full history of these properties, but I remind all agents to look at whatever duty to disclose, if there's a material fact, then it must be presented to the potential buyer,” McKinley concluded.
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