It’s spooky season! What do you do if you’re appraising a home that’s...well, seen some things? You know, murder, ghosts, violent crime, and so on? These are called stigmatized properties, and there are a few ways you can go about appraising them.
What Is a Stigmatized Property?
Like it sounds, the National Association of REALTORS® (NAR) defines stigmatized property as "a property that has been psychologically impacted by an event which occurred, or was suspected to have occurred, on the property, such event being one that has no physical impact of any kind."
This can include properties that have faced any of the following:
- Ghostly paranormal activity
- Death by murder or suicide
- Criminal activity
- Abandonment/vacancy
- Debt
- Public stigma
- Environmental contamination
- Sex offender stigma
How States Handle Stigmatized Property
States have different laws surrounding property stigma — in most cases, property stigmas are required to be disclosed. For example, in California, it is law for any death that occurred in the home in the last three years, including natural deaths, to be disclosed to a potential buyer. In Minnesota, real estate professionals must be transparent about whether the home has been used to produce methamphetamine.
In cases like these, one might come to the opinion that the property value would be negatively affected by a recent death or drug-related activities, so... what about ghosts?
In the case of ghosts, ghouls, and painted eyes that follow you in the night... Could an appraiser make the extraordinary assumption that, perhaps, value could increase on a property that goes bump in the night? Here are some considerations to make.
Some Considerations For Appraising a Stigmatized Property
Appraisers are divided on how to adjust for a stigmatized property, and even more divided on allegedly haunted properties. The first question is almost always one of supply and demand — will anyone want to live here with all this creepiness going on?!
Supply & Demand Considerations
In cases of murders or hauntings, demand will depend on where this property is located, the culture surrounding the neighborhood (including what kind of reputation the property may or may not have), and of course, the property’s condition.
As with any stigmatized property, stigma tends to lessen over time, meaning that supply and demand may only be slightly affected, for a brief period.
In the case of ghosts, however, the ability for this stigma to last or fade would depend largely on the property’s reputation. (Is that the old house everyone in town has been whispering about for generations? Etc.)
Of course, there are also other considerations to be made.
Legal Considerations
Depending on the state, ghosts may not even be disclosed. In 2023, Zillow conducted a state-by-state analysis to determine how hauntings are dealt with in the real estate market. They found that only four states cover paranormal activity in their real estate disclosure laws.
Of the four, New York is the only state that requires outright disclosure regarding ghosts. Failure to disclose this could be grounds to release a buyer from their contract. This kind of law could imply that a haunting is an unsavory, and undesired, feature (thus lowering the property value).
Since each state differs on these laws, an appraiser may never be made aware of a haunting on any given property.
Adjustment Considerations
When searching for comparable properties, due to potential lack of ghastly disclosures, you may run into a sticky scenario. After all, a ghost is unlike a swimming pool or a wrap-around deck or an old, stained carpet — they are not exactly easy “features” to pin down by search alone!
Many appraisers would turn to forums, conversations among their networks, and published data on haunted properties to make a case for an adjustment.
This may be further complicated by the scenario — like if the alleged haunting was caused by a recent murder, for example. In these cases, use your best judgment and most thorough research skills to determine how you might account for a creepy, unusual property.
Appraising Haunted Houses
When it comes to haunted houses, there must be a method to the madness. Here are some approaches to value and other methods that an appraiser could reasonably use when taking on a spooky, scary, or downright strange assignment.
Sales Comparison Approach
If it is made known to an appraiser that an assigned residential property is haunted, they should first turn to quantitative analysis. First and foremost, this could mean finding sales comparisons.
For this reason, it would be helpful to reach out to appraiser forums, discussions, and personal networks to find out if anyone else has worked with a similar property, and what their opinions of value were.
Income Approach
Another useful way to find good, hard data is to use an income approach. Perhaps a haunted house is unsavory for those looking for a home to raise their children, but could be an appealing idea for someone hoping to open a B&B.
An appraiser can find other haunted hotels, houses, and similar properties and find out how their income compares to those which are not haunted.
Qualitative Analysis
In some cases, especially where quantitative adjustments are few and far between, it may be helpful to use qualitative analysis.
To do this, an appraiser may consider finding a property with a “worse” condition than a ghost. Though somewhat subjective, an appraiser, for example, may consider a property where someone was murdered to be “worse” than a haunting.
Then, an appraiser should also find a property with a “superior” condition. What could be considered “better” than a “ghost”? Perhaps “better” (and similarly mystical) could mean a property with a known history of angel visitations? When it comes to paranormal or supernatural activity, perhaps anything could be possible...
Survey Method
Sometimes it takes a village to appraise a haunted house. The survey method can be an extremely useful way for an appraiser to uncover data that they otherwise wouldn’t have found.
To do this, an appraiser might use a personal or professional network, a forum, or other means to send a survey to agents and other appraisers, asking for their experiences and results with paranormal properties.
The data gathered might provide the very last piece of the puzzle needed to unmask the monster of a haunted house appraisal.
No Appraisal Is Too Spooky For The CE Shop Appraisers
When it comes to haunted houses, there are many ambiguous factors at hand. But stigmatized properties are likely to arise in your work as an appraiser, and with some good critical thinking and thorough research, any appraiser will be able to handle them.
We may be biased, but when it comes to handling difficult situations, appraisers who train with us are simply built different. That’s because our courses are fun, fresh, and taught by industry experts themselves. Learn more about becoming an appraiser or advancing your license today.
Comments