Is This House Haunted? What Has to Be Disclosed in Selling House?

'Tis the season!  Haunted houses are top of mind this time of year.  If your house is haunted, do you have to disclose it when you put it up for sale in Georgia?  How do you prove it is haunted?  When it comes to disclosure law, the infamous court case, Stambovsky v. Ackley is often cited as it centers around a haunted house.

Helen Ackley owned a big old Victorian home in Nyack, New York. The town sits about 30 miles north of New York City on the west bank of the Hudson River, in an area known for many haunted places, including the legendary Sleepy Hollow. Mrs. Ackley was well aware that her house was supposedly haunted. In fact, she claims to have seen several ghosts herself, including one that gave her approval for a new paint color in the living room and several dressed in colonial-era clothing. She described her home’s ghosts for the local newspaper and Reader's Digest and even got the house featured on a “haunted house” walking tour of Nyack. When she decided to put the house up for sale and retire to Florida, though, Mrs. Ackley suddenly got very shy about the ghosts.

Jeffrey and Patrice Stambovsky wanted to buy the house and agreed to Ackley’s asking price of $650,000. It wasn’t until after the couple gave Ackley a $32,500 down payment that they were talking to a local about their purchase and were asked, “Oh, you're buying the haunted house?”

The Stambovskys were not exactly thrilled to learn about the alleged haunting of their new home and attempted to back out of the sale. Ackley would neither admit any wrongdoing nor cancel the sale and return the deposit, so the Stambovskys took her to court.

They lost the case, with the court citing their caveat emptor (“let the buyer beware”) responsibility to uncover the property’s defects before committing to a sale. They appealed and the Appellate Division of State Supreme Court ruled in their favor in a 3-2 decision.

The court found that, regardless of whether or not ghosts are real and the house was truly haunted, the fact that the house had been widely reported as haunted affected its value. Ackley “had deliberately fostered the belief that her home was possessed by ghosts” in the past and was therefore at fault for not disclosing this attribute of the house to the buyers, who, not being locals, could not readily learn about the defect on their own. On that note, one of the justices joked, “Who you gonna call?... Applying the strict rule of caveat emptor to a contract involving a house possessed by poltergeists conjures up visions of a psychic or medium routinely accompanying the structural engineers and Terminix man on an inspection of every home subject to a contract of sale.”

The Stambovskys eventually got their money back and Ackley eventually sold the house despite, or maybe because of, the fact that she had to disclose her supposed ghosts.

Wikipedia defines a stigmatized property as such:  ...property which buyers or tenants may shun for reasons that are unrelated to its physical condition or features.  These can include murder, suicide, or even AIDS, in addition to a belief that a house may be haunted.  

Some people think that the seller has a duty to disclose any such history of the property. This, in practice, falls into two categories: demonstrable (physical) as well as emotional. These guidelines vary from state to state.

The Georgia Real Estate Commission's website addressed this issue as follows:

The Commission frequently receives telephone calls asking how licensees should handle the sale or lease of property on which a heinous crime occurred or perhaps is said to be haunted. Textbooks generally describe such properties as "psychologically impacted." That term generally describes emotional factors rather than economic factors which may influence the decision of a prospective purchaser or tenant. 

Properties that were the scene of a murder, a rape, or a suicide or that were occupied by a person with a communicable disease or by a person who has had AIDS – all are generally described as psychologically impacted. Should licensees disclose such matters? The answer is sometimes "yes" and sometimes "no." 

The law requires licensees to disclose material information about a property to prospective purchasers or tenants. Generally, the courts have held that whatever is material to the buyer or tenant is, in fact, material. That means that licensees must disclose anything that affects whether the buyer would want to purchase the property or affects what the buyer is willing to pay for the property'. 

When a defect is physical (for example, a leaking roof or unsound foundation), the issue is clear. Licensees must disclose. When the defect is emotion (for example, murder or ghosts), the answer varies. 

The Official Code of Georgia Annotated Section 44-1-16 addresses this issue directly: 

(a)(1) No cause of action shall arise against an owner of real property, a real estate broker, or any affiliated licensee of the broker for the failure to disclose in any real estate transaction the fact or suspicion that such property: 

(A) Is or was occupied by a person who was infected with a virus or any other disease which has been determined by medical evidence as being highly unlikely to be transmitted through the occupancy of a dwelling place presently or previously occupied by such an infected person; or 

(B) Was the site of a homicide or other felony or a suicide or a death by accidental or natural causes; 

provided, however, an owner, real estate broker, or affiliated licensee of the broker shall, except as provided in paragraph (2) of this subsection, answer truthfully to the best of that person´s individual knowledge any question concerning the provisions of subparagraph (A) or (B) of this paragraph. 

(2) An owner, real estate broker, or affiliated licensee of the broker shall not be required to answer any question if answering such question or providing such information is prohibited by or constitutes a violation of any federal or state law or rule or regulation, expressly including without limitation the federal Fair Housing Act as now or hereafter amended or the state´s fair housing law as set forth in Code Sections 8-3-200 through 8-3-223. 

(b) No cause of action shall arise against an owner of real property, real estate broker, or affiliated licensee of the broker for the failure to disclose in any real estate transaction any information or fact which is provided or maintained or is required to be provided or maintained in accordance with Code Section 42-9-44.1. No cause of action shall arise against any real estate broker or affiliated licensee of the broker for revealing information in accordance with this Code section. Violations of this Code section shall not create liability under this Code section against any party absent a finding of fraud on the part of such party. 

This “Stigmatized Property” was first adopted in 1989 (and subsequently amended in 1998 and 2001). After 1989, the federal and state fair housing laws changed to prohibit discrimination based not only on race, color, religion, sex, or national origin, but also based on familial status and handicap. Subsequent federal rulings defined handicap to include persons with AIDS. 

Therefore, the Commission sought the advice of the Attorney General's office on the impact of the federal law on Georgia's "Stigmatized Property" law. The advice that it received indicates that there is a conflict between the law as it relates to diseases such as AIDS. If asked about such diseases as AIDS, a licensee "should respond by stating that he or she is unable to answer such an inquiry." Such a response is consistent with how licensees have traditionally responded to questions related to fair housing issues. 

However, the Attorney General's office indicated that when a client or customer questions a licensee as to whether a property "was the site of a homicide or other felony or the site of a suicide," the licensee should "answer truthfully to the best of such [licensee's] knowledge. 

Licensees must affirmatively disclose material defects in the physical condition of the property. However, they are not required to disclose whether a homicide or other felony or a suicide occurred on a property unless a prospect asks them. The key distinction is that felonies, suicides, and infectious diseases generally do not involve the physical condition of the property. Their impact on the property is psychological.  Nevertheless, sometimes the seller will make the licensee aware that such an event occurred on a property. If that occurs, the licensee should advise the seller that affirmatively disclosing the event to prospects can eliminate future problems. For example, a prospect who enters into a contract may seek to rescind the contract if he or she later learns of such an event. Disclosure at the outset reduces the negative impact of a prospect's psychological reaction to the seller's property. At the same time, it builds confidence in the agent's and seller's integrity. 

I'm curious as to your experience regarding this issue.  Do you believe a house can be haunted?  Would it matter to you if someone had died on the property you're considering? Would you mind living next to a graveyard?  I have worked with buyers who refused to live next to a graveyard.  I counter, "What better neighbors could you have?"

If you're considering buying or selling real estate, please consider contacting me at The Norton Agency.  I work with husband, David Stovall, who specializes in commercial, investment and acreage real estate and my mother, Joyce Waters, who has worked alongside me since 2002 in residential real estate.

And just in case you're interested, check out Top 10 Haunted Houses for Sale.

Kim Waters

770-540-3788

kim@kimwaters.com