Seems like a fair question, doesn’t it? So why are real estate agents so dodgy when they get asked that question? And how can you get an answer if the agent can’t tell you?
Believe it or not, real estate agents have to comply with multiple laws regarding what they can and cannot disclose about a property. Most people think that they must disclose everything they know, but there actually are nuances a lot of buyers don’t know about.
First, let’s talk quickly about stigmatized property.
In real estate, stigmatized property is property that buyers or tenants may shun for reasons that are unrelated to its physical condition or features. These can include death of an occupant, murder, suicide, and belief that a house is haunted. Some people simply do not want to live in a property in which any of that sort of thing has happened.
Other types of stigma include:
Criminal stigma: The property was used in the ongoing commission of a crime. For example, a house is stigmatized if it has been used as a brothel, chop shop, or a drug den. In the case of drug dens, some drug addicts may inadvertently come to the address expecting to purchase illegal drugs even after a sale to a new owner. Most jurisdictions require full disclosure of this sort of element.
Debt stigma: Debt collectors unaware that a debtor has moved out of a particular residence may continue their pursuit at the same location, resulting in harassment of innocent subsequent occupiers. This is particularly pronounced if the collection agency uses aggressive or illegal tactics.
Murder/suicide stigma: Some jurisdictions in the United States require property sellers to reveal if murder or suicide occurred on the premises. California state law does if the event occurred within the previous three years. To protect sellers from lawsuits, Florida state law does not require any notification. In North Carolina, sellers and agents do not have to volunteer information about the death of previous occupants, but a direct question must be answered truthfully. In Arizona agents are actually forbidden to disclose such things. We will get to why in a few paragraphs.
Phenomena stigma: Many (but not all) jurisdictions require disclosure if a house is renowned for “haunting”, ghost sightings, etc. This is in a separate category from public stigma, wherein the knowledge of “haunting” is restricted to a local market.
Public stigma: When the stigma is known to a wide selection of the population and any reasonable person can be expected to know of it. Examples include the Amityville Horror house and the home of the Menendez brothers.
A stigmatized property can be worth much less than it may otherwise be worth, the result of simple supply and demand. One could argue that someone may be willing to pay extra for a famous or historic property (a local example is the unit actor Bob Crane who was best known for the sitcom Hogan’s Heros was murdered in in Scottsdale, for years there were people who wanted to buy it and who would pay a premium for it.) however the reality is that many people will just steer clear of a stigmatized property.
For that reason an Arizona real estate agent can be found to be in violation of their fiduciary duties to a seller if they damage the seller’s ability to sell if they damage the seller’s ability to get the most amount of money possible for a property. Because agents are protected by law if they do not disclose such things, some brokerages have internal rules actually forbidding it in order to protect a clients property value.
And yet a buyer’s agent has a fiduciary to their client to make sure their best interests are met, and this will include the buyers need for information and satisfaction with their purchase.
This is clearly an example of why both parties need fiduciaries in their corners, as there is an obvious disjoint between the buyers and sellers best interests (assuming a buyer wants to avoid any or all of these stigmas).
So what can the agents do and say?
Under the Arizona stigmatized property law a seller, a landlord, and any real estate agent are not required to disclose that a natural death, a suicide, or a homicide occurred in the home. Therefore, one does not have to disclose to the buyer that their mother died in their home. Additionally, a seller, landlord, and any real estate agent also do not have to disclose HIV/AIDS, sex offenders, or any crime that occurred in the home.
To quote the actual law, A.R.S. 32-2156. Real estate sales and leases; disclosure,
A. No criminal, civil or administrative action may be brought against a transferor or lessor of real property or a licensee for failing to disclose that the property being transferred or leased is or has been:
1. The site of a natural death, suicide or homicide or any other crime classified as a felony.
2. Owned or occupied by a person exposed to the human immunodeficiency virus or diagnosed as having the acquired immune deficiency syndrome or any other disease that is not known to be transmitted through common occupancy of real estate.
3. Located in the vicinity of a sex offender.
B. Failing to disclose any fact or suspicion as set forth in subsection A shall not be grounds for termination or rescission of any transaction in which real property has been or will be transferred or leased.
In 2014, a court ruled that Arizona stigmatized property nondisclosures do not protect against affirmative misrepresentations (Lerner v. DMB Realty, LLC, 234 Ariz. 397, 322 P.3d 909 (Ct. App. 2014)). In the Lerner case, the sellers with young children decided to sell when they discovered that there was a sex offender living next door. After listing the property, the sellers were present for a showing and were asked by the buyer Lerner (the principal in the law firm Lerner & Rowe) the reason why the sellers were moving. The sellers could have declined to answer the question, and Arizona’s stigmatized property law would have protected them from having to disclose the presence of the sex offender living next door. Instead, the sellers lied and said that they were moving to be closer to friends. The Court of Appeals ruled that although the sellers had no obligation to disclose, the sellers could not lie about their reason for moving.
Ok, so it seems clear that certain types of events have been covered by the law. How about other crimes? Like what about crimes that happened next door?
Not only must brokers and their agents tell you about such things if asked directly — they’re required to answer your questions truthfully — they’re also supposed to be upfront about them. When they know something about a property that is a material defect, they have to volunteer that information to a buyer.
Sounds great, but here’s the hitch: It all hinges on the agent’s awareness of the problem. Agents can’t disclose something they don’t know about, and sellers have less incentive to be forthcoming.
Sellers can always respond by stating that they don’t know the answer to a question if that’s truly the case, and some sellers can be reasonably expected to know more about a home than others. For example, longtime homeowners will be more familiar with their property than an out-of-state heir tasked with selling a grandparent’s house.
“Crime” does not have its own category in a sellers disclosure statement. It also does not come under “Are there any other material defects affecting the property that a buyer should know about?”
Furthermore, an agent can’t make value judgements. One person’s “safe” may be someone else’s “unacceptable.” For example, did you know that urinating in public in Arizona is one way of many that gets a person classified as a sex offender? Speaking for myself, I would have no problem living next to someone who got a ticket for something like that when they were a kid. However as an agent, if someone tells me they don’t want to be in a neighborhood with sex offenders, I am not about to argue with them. What is ok for me may or may not be ok for them, and it is not up to me to judge.
So here is what you, when you are buying a home, can do.
First of all, check your area out at a web site like www.Mylocalcrime.com Similar sites are all over the web and not only can they be useful, they can be a LOT of fun.
Secondly, ask your agent for the latest version of the Arizona Associations of Realtor’s “Buyer Advisory.” This document is only around a dozen pages and is absolutely full of useful information, internet links on all sorts of topics, and tips on how to find things out for yourself regardless of what a seller does or does not disclose (including a link to the states sex offender site at https://www.azdps.gov/services/public/offender since I brought it up).
This will give you the information you want, and no one can get in your way of you doing your own due diligence.
In fact, since you read through this whole thing, just drop me a line here and I will send you the latest version right away, for free. It’s a great way to start your research right now if you are considering buying a home anytime soon.
Nolo has a great article for further reading – https://www.nolo.com/legal-encyclopedia/arizona-home-sellers-disclosures-required-under-state-law.html