Oct. 06, 2022 | CREBNow
The stigma around stigmatized properties
With spooky season around the corner, haunted houses and other chilling structures are always at top of mind.
This October, CREB®Now interviewed Jay Boville, BComm., AACI partner at Sage Appraisals, and Dr. Kristian Tzneov, MBA, Real Estate Regulatory Compliance Advisor at the Real Estate Council of Alberta, to answer some commonly asked questions about stigmatized properties.
So, what is a stigmatized property?
A stigmatized property has a perceived condition or occurrence that took place and has nothing to do with the actual property structure or livability.
Some examples of stigmatized properties include death by natural causes, criminal activity, murder or reports of a haunted home.
How does a stigma impact property value?
The public perception of a stigmatized property is what gives it the stigma.
“Although you can purchase the property at a discount, and stigmas tend to decrease with the passage of time depending on the stigma, it would always be an issue versus a “normal” property,” says Boville. “An analogy would be buying a car that has been involved in an accident versus one that has not; it is a similar principle.”
How do you determine the value of a stigmatized property?
Determining the value of a stigmatized property varies depending on the stigma.
“An example of this could be the stigma of a property backing a cemetery. Some buyers may see a cemetery as a positive influence where you would have quiet neighbors and others may see this as a negative influence, whether it is cultural and/or personal preference,” says Boville.
“To determine the value/discount for a stigmatized property, you would perform a paired-sales analysis: compare the sale price of a stigmatized property with a similar property. The difference in value will indicate the discount for the stigma.”
Does property value decrease for neighbouring homes?
When looking at stigmatized properties, the value of surrounding homes in the neighborhood are not impacted, especially if the stigma is involving murder, suicide or crime related to one specific property.
“The simple answer to this is no,” says Boville. “Unless you are looking at a community stigma such as high criminal activity, a known flood, the site of a gas leak or contamination, the value of the surrounding homes would not be affected.”
What is your top tip for buyers?
As a buyer, it’s always good to discuss what you are looking for, even if it goes beyond a home’s physical characteristics.
“I think the most important takeaway from this is that to protect themselves, buyers should be asking as many questions about the property as possible,” says Tzneov.
What is your top tip for sellers?
Tell the truth and do not mislead or lie about your property.
“If a buyer’s representative is asking about whether a property was a former grow-op, if there was ever a death on the property, if the property has a reputation of being haunted, etc., then the seller’s representative must either answer truthfully or indicate that the Seller has instructed them not to answer such questions, which usually is indicative of the actual answer,” says Tzneov.
To buy or not to buy a stigmatized property?
“Generally, buyers like a consistent product,” says Boville. “Along with location, location, location, buyers seem to also really like typical, typical, typical; a stigma adds a wrinkle to this preference.”
Whatever your personal preference is for the future property of your dreams, your REALTOR® will help you navigate the home buying and selling process.
For more information, visit the consumer hub.
About Jay Boville
Jay Boville, BComm., is a partner at Sage Appraisals. He is recognized by the Appraisal Institute of Canada (AIC) and is a designated AACI. Jay is also an expert witness at the Court of King’s Bench of Alberta and a partner at Brookville Property Advisors Inc., which is a commercial real estate brokerage.
About Kristian Tzenov
Kristian Tzenov is a Real Estate Regulatory Compliance Advisor with the Real Estate Council of Alberta. Kristian has his Master of Business Administration, Real Estate and holds a Doctor of Law.
Stigmatized Real Estate