Looking to buy a new home is a very exciting experience. Whether it is your first home purchase or you are an expert at it, there are always certain features you will have on your wish list. It may be a sparkling pool, large yard, plenty of living space or a modern kitchen, but what about a ghost or a sordid past?
Of course, every home has a history, some better than others, but it is not usually something you give too much consideration. Generally, we get a ‘feel’ from a house and if it feels right it and covers our checklist we are happy. You would also presume when going to contract that all is well with your new home.
So legally, what past information has to be disclosed to future buyers by a real estate agent? In most cases, if you ask an agent about a certain matter and they know the answer, then they are legally bound to be honest with you. However, what if there is an issue you normally wouldn’t contemplate asking about, like a sordid history or things that go bump in the night?
In Australia, we refer to these types of issues as ‘material facts’ or ‘stigmas’. This applies when an event has happened on or near a property, which could deem it undesirable to a potential purchaser. There are different types of material facts that can surround a property and they are all worth asking about. They can also have a huge baring on the sale price.
A criminal stigma will surround a home if it has been used for any illegal purposes. For example, as a brothel, drug house or the scene of any major criminal activity like sexual or violent assault. Undesirable, direct neighbours such as known sex offenders also fall under this category.
An environmental stigma pertains to anything that may hazardous to the occupant’s safety or health such as toxic or chemical waste. When a house has been used as a ‘meth lab’ for instance, the cooking of the drug leaves a hazardous residue throughout the home. This can pose huge health risks to the occupants and requires an extensive clean up. Unfortunately, this stigma is becoming more common
A murder or suicide stigma is self-explanatory, but certainly, information most potential buyers would want to know about. In some cases, these events are known to neighbours or have been in the media, so may be brought to your attention later on down the track. It is common for people to pass away at home, and the likelihood of this is greater in older houses, but the situation surrounding it is what matters.
A debt stigma could pose problems to new owners due to potential on-going debt collection. If the previous owners owned money, debt collectors or unsavoury types may continue to harass the new owners thinking they are their target.
Lastly and usually the most intriguing, is a phenomena stigma. This stigma covers any home known to be haunted or the site of any paranormal activity. To some curious purchasers, this may be appealing, but most of us would like to be for-warned. Believe it or not, this is a real issue.
Under Australian common law, homeowners and real estate agents are required to disclose any information considered a material fact or stigma. This topic came under the microscope in 2004 when buyers went to contract on the Sydney home where Sef Gonzales had brutally murdered his family in 2001.
Once they found out they no longer wanted to go ahead with the purchase and thankfully, had their deposit refunded. The agency involved were fined heavily for breaching the ‘acts for misleading behaviour in promoting the property for sale’. The home did sell again later for a lesser amount, to someone who was not deterred by the property’s macabre past.
It did bring about a review however, of the laws surrounding disclosure. There is still no stand-alone disclosure, but real estate agents must now disclose any material fact or stigma known to them before they can legally sell a property.
Unfortunately, what actually constitutes this is not always clear, but the Office of Fair Trading do give general guidelines for your state. Different religions and cultures may also have varying opinions on what they consider material fact or stigmas to be.
It certainly pays to ask the real estate agent these questions if you have any concerns when looking for a new property. The last thing anyone needs is a nasty surprise once they have purchased and moved into their new home.