Ghoul Disclosure: Must Home Sellers Disclose Paranormal Activity?
Susan Funaro
Published on Legal Zoom Newsletter 10/25/07
As home seller, you dutifully check off the "to do" list your realtor suggests for a quick sale—curb appeal, leaky faucets fixed, termite reports, and oh, what about the other occupants? Do I have to mention them? This question brings new meaning to the saying, "Buyer Beware!" If the thought of buying a house isn't scary enough, does the buyer need to worry about checking for poltergeists along with old plumbing?
Although the wording may vary state to state, most real estate laws require sellers to disclose known problems with the house. This includes certain "material facts" such as structural concerns, the age of the roof and shingles, leaks in the foundation and walls, existing mold and mildew, and total square footage. Material facts can also include other items that affect the house's value such as the amount of property taxes, details about individuals who claim to have an interest in the house, or overlaps on adjacent properties.
Items not considered material facts include personal information about a seller, such as pending foreclosure or divorce, illnesses of the seller, or the seller's reasons for moving (uh oh!) What if the seller's reason for moving involves the paranormal? Remember the unhappy inhabitants in Poltergeist, The Amityville Horror, and The Others? Must a seller disclose whether their property is haunted? Or what if a heinous crime, murder, or suicide occurred on the property?
Death on a property may be material. In California, the Association of Realtors addressed the issue of death disclosure requirements. Civil Code §1710.2 states death on a property need not be disclosed if it occurred more than three years prior to the sale. The statute does require disclosure of a death more than three years old if the buyer asks. It does not state whether a death within three years must be disclosed, but many brokerage firms have Supplemental Disclosure Forms that specifically inquire about death. To avoid liability, it is recommended the seller disclose if a death occurred within the last three years, and let the buyer decide.[1] Some states have even gone further requiring home sellers to disclose "stigmas" attached to a property, which can include proximities to homeless shelters or whether it was scene to a violent crime.
In New York, a buyer sued the seller and the seller's realtor for failure to disclose the house's ghostly reputation. The seller even wrote about her bumps in the night with spirits for the local paper and Readers' Digest. However, many neighbors doubted the claims of the seller's spectral encounters, since the house was built in the 19th century and one of her spooks was anachronistically dressed in a Revolutionary War uniform. Although the court did not rule nondisclosure of the house's reputation as fraudulent, it did allow the buyer out of his contract and the return of his down payment. The house did eventually sell for $630,000 and several years later for $900,000.
According to a study by two business professors at Wright University, the supernatural stigma associated with houses where murder or suicide have occurred can take 50% longer to sell, and at an average of 2.4 percent less than comparable homes. Yet, a California appraiser, who specializes in diminution in value issues, says that a well publicized murder generally lowers selling price 15 to 35 percent.
Some homebuyers are not hindered by the macabre, especially if the gruesome past involves celebrities or legends. Indeed, ghosts can even be a selling point for some towns that rely on their dead inhabitants for tourist appeal. Cities like St. Augustine, New Orleans, and Hollywood all provide ghost tours of popular sighting sites. In St. Augustine, a legendary haunted house turned restaurant lures in diners with the prospect of seeing the house's former owner—a woman dressed in white who purportedly appears in mirrors and walks the second floor. Even homes that have witnessed notoriously grisly events have managed to sell. O. J. Simpson's home sold to an investment banker for about $4.7 million, and the Miami estate where Gianni Versace was murdered was auctioned for about $20 million.
Sellers should disclose grisly facts about the house, so they will not be "haunted" later. Even if not required by state law, in order to soothe the spirits of prospective buyers and avoid lawsuits, the seller should be upfront about their home's paranormal guests or ghoulish histories. In a sellers' market, ghosts tend to fade and may even disappear.
Wednesday, October 31, 2007
Sunday, October 7, 2007
How Wall Street Stoked The Mortgage Meltdown
By Michael Hudson
From The Wall Street Journal Online
Email your comments to rjeditor@dowjones.com.
-- June 28, 2007
Twelve years ago, Lehman Brothers Holdings Inc. sent a vice president to California to check out First Alliance Mortgage Co. Lehman was thinking about tapping into First Alliance's lucrative business of making "subprime" home loans to consumers with sketchy credit.
The vice president, Eric Hibbert, wrote a memo describing First Alliance as a financial "sweat shop" specializing in "high pressure sales for people who are in a weak state." At First Alliance, he said, employees leave their "ethics at the door."
The big Wall Street investment bank decided First Alliance wasn't breaking any laws. Lehman went on to lend the mortgage company roughly $500 million and helped sell more than $700 million in bonds backed by First Alliance customers' loans. But First Alliance later collapsed. Lehman landed in court, where a federal jury found the firm helped First Alliance defraud customers.
Today, Lehman is a prime example of how Wall Street's money and expertise have helped transform subprime lending into a major force in the U.S. financial markets. Lehman says it is proud of its role in helping provide credit to consumers who might otherwise have been unable to buy a home, and proud of the controls it has brought to a sometimes-unruly business.
Now, however, that business is in deep trouble, and some consumer advocates and policy makers are pointing the finger at Wall Street.
Read whole article here.
From The Wall Street Journal Online
Email your comments to rjeditor@dowjones.com.
-- June 28, 2007
Twelve years ago, Lehman Brothers Holdings Inc. sent a vice president to California to check out First Alliance Mortgage Co. Lehman was thinking about tapping into First Alliance's lucrative business of making "subprime" home loans to consumers with sketchy credit.
The vice president, Eric Hibbert, wrote a memo describing First Alliance as a financial "sweat shop" specializing in "high pressure sales for people who are in a weak state." At First Alliance, he said, employees leave their "ethics at the door."
The big Wall Street investment bank decided First Alliance wasn't breaking any laws. Lehman went on to lend the mortgage company roughly $500 million and helped sell more than $700 million in bonds backed by First Alliance customers' loans. But First Alliance later collapsed. Lehman landed in court, where a federal jury found the firm helped First Alliance defraud customers.
Today, Lehman is a prime example of how Wall Street's money and expertise have helped transform subprime lending into a major force in the U.S. financial markets. Lehman says it is proud of its role in helping provide credit to consumers who might otherwise have been unable to buy a home, and proud of the controls it has brought to a sometimes-unruly business.
Now, however, that business is in deep trouble, and some consumer advocates and policy makers are pointing the finger at Wall Street.
Read whole article here.
Friday, October 5, 2007
'Subprime' Aftermath: Losing the Family Home
By Mark Whitehouse
From The Wall Street Journal Online
Email your comments to rjeditor@dowjones.com. -- May 31, 2007
For decades, the 5100 block of West Outer Drive in Detroit has been a model of middle-class home ownership, part of an urban enclave of well-kept Colonial residences and manicured lawns. But on a recent spring day, locals saw something disturbing: dandelions growing wild on several properties.
"When I see dandelions, I worry," says Sylvia Hollifield, an instructor at Michigan State University who has lived on the block for more than 20 years.
Ms. Hollifield's concern is well-founded. Her neighbors are losing interest in their lawns because they're losing their homes -- a result of the recent boom in "subprime" mortgage lending. Over the past several years, seven of the 26 households on the 5100 block have taken out subprime loans, typically aimed at folks with poor or patchy credit.
Some used the money to buy their houses. But most already owned their homes and used the proceeds to pay off credit cards, do renovations and maintain an appearance of middle-class fortitude amid a declining local economy. Three now face eviction because they couldn't meet rising monthly payments. Two more are showing signs of distress.
Read whole article here.
From The Wall Street Journal Online
Email your comments to rjeditor@dowjones.com. -- May 31, 2007
For decades, the 5100 block of West Outer Drive in Detroit has been a model of middle-class home ownership, part of an urban enclave of well-kept Colonial residences and manicured lawns. But on a recent spring day, locals saw something disturbing: dandelions growing wild on several properties.
"When I see dandelions, I worry," says Sylvia Hollifield, an instructor at Michigan State University who has lived on the block for more than 20 years.
Ms. Hollifield's concern is well-founded. Her neighbors are losing interest in their lawns because they're losing their homes -- a result of the recent boom in "subprime" mortgage lending. Over the past several years, seven of the 26 households on the 5100 block have taken out subprime loans, typically aimed at folks with poor or patchy credit.
Some used the money to buy their houses. But most already owned their homes and used the proceeds to pay off credit cards, do renovations and maintain an appearance of middle-class fortitude amid a declining local economy. Three now face eviction because they couldn't meet rising monthly payments. Two more are showing signs of distress.
Read whole article here.
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