Murder, Mayhem and Seller's Disclosure

Murder, Mayhem and Seller’s Disclosure 

You found your dream home in Spruce Grove, Stony Plain, Parkland County or the Edmonton area, agreed to buy it, and received a glowing report from your home inspector.  After concluding the deal and moving in, you learn to your horror that your dream home was the scene of a violent murder!  This was not disclosed by the seller or the real estate agent who listed the home.  What now? 

A recent broadcast on CBC Radio’s The Current with Anna Maria Tremonti got me thinking about problem properties.  Entitled “Stigmatized Real Estate and What Sellers Must Disclose”, the broadcast focused on properties where a violent crime, such as murder, was committed.  

As a prospective buyer of any property, how do you know if what you’re seeing and what you’re told about a property is the whole truth?  Well, the fact is, you don’t.  While there are rules about what a seller must disclose, those rules tend to be a little, shall we say, open-ended.  

Interviewed on the program was Barry Lebow, a real estate broker and appraiser with a great deal of expertise in dealing with stigmatized properties.  He noted that these properties might be ones where a crime such as murder was committed, but could also be homes at the heart of any unsavory situation:  used as grow ops, contaminated by mold, asbestos, urea formaldehyde foam insulation and the like, infested by termites or rodents, subject to repeated flooding, etc.  I am also reminded of the recent cases in Calmar, Alberta where homes were built on top of decommissioned gas wells, leading to much anguish for the unsuspecting owners of those homes.  Mr. Lebow pointed out that very few jurisdictions in North America have legislation dealing with disclosure about property defects.  

So, what is a prospective buyer to do?

• Be aware that a property inspection will only expose “patent defects”; that is, problems that are clearly visible, such as a cracked foundation.  A home inspector will not usually be able to determine “latent defects”, or those that are not immediately visible, such as a water leak that has been hidden behind new drywall, for example, or those situations I mentioned above.
• Sellers and real estate agents do have an obligation to disclose “material facts” about a property, if known.  This is any information that a reasonable person would probably want to know about a property.  As you can see, this allows for a great deal of subjective interpretation and uncertainty.   Furthermore, this duty to disclose can obviously only be enforced if the seller and agent are aware of the problem.  A small town crime may well become a local legend for generations, meaning that every owner/seller will know about the incident, whereas in a big city, where memories are shorter, subsequent owners may be unaware of anything to be disclosed.
• House hunters must take it upon themselves to tell their real estate agent not only what they want in a home, but also what they will not accept.  If they are squeamish about buying a home that has been the scene of a violent crime, then they must make their agent aware of this so that the agent can seek out any hidden history.
• As a buyer, be prepared to ask lots of questions about any property you are considering for purchase, and take it upon yourself to learn its history.  It’s also a good idea to put those questions in writing, and insist upon a written response.  Talk to your prospective neighbors too! 

If you do end up unknowingly buying a property with a secret past, what can you do?  Backing out of the deal, or immediately re-selling the home are probably not options because of the expense involved, unless you are so spooked by the thought of living in such a home that no amount of money is worth the emotional toll.  It should also be noted that stigmatized properties usually see a decrease in value of 10-20%.  If you can be pragmatic about the unexpected surprise of owning a property with a past, consider ways you can change the property – cut down or add shrubbery, repaint or change the siding, replace the house numbers and trim – to give it a whole new history.