Buying a stigmatized property can be a great bargain.
You can't believe your luck. After months of searching for just the right property, you've found a steal. New kitchen and baths, lots of windows to take in a great view, tons of upgrades, great neighborhood, and it's priced 20% below the most recent home sale on the street.
The catch? A previous owner was an unsavory character with a notorious past. It doesn't matter whether the neighborhood gossip is true or false. The word is out.
Welcome to what's known in the real estate industry as the world of "stigmatized properties." These are homes that, because of a dubious past owner or because they've been the site of a publicized crime, are selling below market value.
Stigmatized homes can give you an incredible deal -- if you can get used to owning a property that draws tourists who seek out the scene of a legendary crime.
Real-estate experts break stigmatized properties down into two distinct classifications: Those with "physical" and those with "psychological" damage. A physically damaged property could be one that survived after its neighboring home fell into a sinkhole or was buried by a landslide. The owner may be thankful his house didn't get a scratch, but he's selling and moving to safer ground just the same.
Psychological damage is the kind that raises the hair on the back of your neck. It could be a house where psychics wave their hands around the doors to get a sense about the many spirits inside, or a property that became an armored compound a few years back by a prison-bound drug lord.
Real estate agents may not be required to tell you about a potential stigma regarding the house you're checking out, depending on state law. And even then, what constitutes a stigma may be up to the potential buyer's judgment. Some may feel fine about buying a house where a murder once happened. Others may be squeamish even looking at a home where an elderly owner died peacefully.
There's also the element of potential stigmas affecting real estate.