May 21, 2018

Disclosure and Stigmatized Properties

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Disclosure and Stigmatized Properties

TIP: Persons with AIDS or who are HIV positive are protected under federal fair housing laws. For this reason, the U.S. Department of Housing and Urban Development has declared it illegal to disclose that the current or former occupant of a property had AIDS or was HIV positive. In Property Disclosures: What You Need to Know Training Kit, the NATIONAL ASSOCIATION OF REALTORS® suggests that if you are asked a direct question on this subject, you can inform the buyers that by answering you might be in violation of the federal fair housing laws and that if they wish to pursue the question, they must investigate on their own.

In addition to physical defects, some properties have unusual features or histories that may negatively affect the value or salability of the property. For example, if a murder took place at the home, the stigma of that event may prompt some buyers to be unwilling to buy the property.

Some state laws explicitly relieve the salesperson or broker of the obligation to disclose certain property stigmas. Where that is not the case, failing to disclose a stigma presents a risk of later charges of misrepresentation. When selling a stigmatized property, remember to:

  • Determine if the reasons for the stigma are factual.
  • Check state law to determine if disclosure of the stigma (for example, suicide, homicide, or prior residents with AIDS) is specifically excluded.
  • If state law does not address and resolve the question of disclosure, determine the materiality of the stigma. Ask yourself if knowledge of the stigma would affect the willingness of a reasonable person to buy the property or would change the amount that person was willing to pay.
  • Discuss the disclosure with the sellers if you decide that the stigma is a material one that must be disclosed.
  • Disclose stigmas you determine are material, but do so judiciously. Explain them only to seriously interested potential buyers.

Note: This information provides general legal information and should not be relied upon as legal guidance. Before acting, both the relevant laws and legal counsel should be consulted. This information should not be construed as specific legal advice nor as an opinion on particular facts, cases, or situations.

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