Summary
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- Understanding Stigmatized Properties: These properties are shunned due to non-physical factors like criminal activities or paranormal events, impacting their market value and legal considerations.
- Types of Stigmatization: From criminal activities to environmental contamination, various factors can stigmatize a property, affecting its desirability and valuation.
- Identifying Stigmatized Properties: State disclosure laws vary, requiring thorough research through online resources, local agents, or police records to determine a property’s stigma.
- Appraisal Considerations: Appraising stigmatized properties demands legal expertise, understanding of supply-demand dynamics, adjustment approaches, and strategies to generate business, potentially through partnerships with law firms or niche market specialization.
Are you looking for a niche specialty or a way to expand your appraisal business? Specializing in properties perceived as stigmatized presents both challenges and opportunities for appraisers. Get an overview of this property type, including the definition of a stigmatized property, the different types and their impact on property value, and key considerations for appraising stigmatized properties.
Learn more in our CE course, “Complex Properties: The Odd Side of Appraisal.”
What is a stigmatized property?
A stigmatized property is generally defined as one that buyers or renters shun for reasons unrelated to its physical condition or features. Examples include properties where events like murder/suicide, criminal activity, or paranormal activity have taken place—or are rumored to have taken place. Haunted houses, drug dens, and violent crime settings are likely to carry a stigma that makes them less desirable and devalued by the marketplace.
Laws or guidelines related to the sale of stigmatized properties are determined by the state and may vary from jurisdiction to jurisdiction.
Types of stigmatized properties
A property may become stigmatized for a variety of reasons:
- Criminal activity – Illegal activity (e.g., drug dealing, violent crime) took place on the premises.
- Murder/suicide – A murder or suicide occurred on the property. Disclosure depends on state law. For example, Maryland law does not require disclosure, whereas California law requires that these events must be disclosed.
- Paranormal activity – The property is notorious for hauntings, ghost sightings, etc. and is rumored to be “haunted.”
- Public stigma – A public property that has a widely-known stigma, such as The Amityville Horror house.
- Environmental contamination stigma – A property that is contaminated or in close proximity to facilities with hazardous materials and potential environmental problems.
- Debt stigma – A property formerly owned by debtors may deter new buyers because they’re worried about potentially being harassed by debt collectors.
- Abandoned property stigma – While having a negative effect on neighborhood property values, vacant and abandoned properties can also be a good “fixer-upper” opportunity for investors or homeowners with the right skills.
- Sex offender stigma – A property located in the same neighborhood as a known sex offender may be stigmatized by its proximity to a potential predator.
How to find out if a property is stigmatized
Disclosure laws related to stigmatized properties vary from state to state, so you may need to do a little digging to learn if a property is stigmatized. Check online resources (sometimes a simple Google search will tell you what you need to know), ask local real estate agents, or contact the local police department to find out about past events or rumored happenings associated with a certain property.
Additionally, there are online search subscription services available that provide information on whether a house is known to have had a death at the address (murder, suicide, or accidental), involvement in a meth lab, presence on the sex offender registry, and fire-related incidents.
Considerations for appraising stigmatized properties
No matter what your current specialty, the area of appraising stigmatized properties is worth exploring, as it offers a unique opportunity for business growth and career development. Representing a small part of the appraisal field, stigmatized properties require extensive research and a high level of knowledge and experience. Furthermore, they involve legalities that vary state by state. Such factors make stigmatized property appraisal a challenging yet potentially profitable niche.
Legal considerations
As an appraiser, you are dependent upon state law as to the level of detail and exposure allowed. Some types of stigmatized properties must always be disclosed, some are determined by the jurisdiction, and occasionally it is left up to others (e.g., the seller or real estate agent). So, one size does not fit all. You must take your state’s laws into consideration when deciding whether to accept an assignment.
Supply and demand considerations
A violent crime is often considered a major deterrent by buyers and (although psychological) can cause the property to be devalued by the marketplace. However, this situation can be offset by the desirability and convenience of location. Additionally, the stigma tends to lessen over time.
Adjustment approach considerations
The availability and approach for identifying comparable properties depends on the type of stigmatization. If you specialize in environmentally stigmatized properties, for instance, you will most likely find an array of published data that you can use to make a case for a measurable adjustment.
The research needed to identify and derive an adjustment when appraising a murder/suicide property, on the other hand, involves thinking outside the box and coming up with a reasonable method. Researching crime records, comparable areas, number of murders within a given period, and type of murder/suicide, and developing the framework for comparison and analysis, requires extensive research and skill.
How to generate business and find clients
Just as appraisers specialize in niche markets, so do attorneys. One way to grow your business is to develop a relationship with local attorneys handling litigation for stigmatized properties. The affiliation with a law firm can lead to increased income, as making the transition to becoming an expert witness in stigmatized property cases would be a natural offshoot.
Because stigmatized properties are the result of a situation, opportunity lies in the event and the expansion of any niche market. For example, say you specialize in appraising water-front properties. If you see properties in your area becoming stigmatized by an environmental condition such as phosphorous run-off from development, this opens the door to add the sub-category of “stigmatized water-front appraising” to your list of specialties.
Owners of stigmatized properties need pre-listing appraisals. A pre-listing appraisal of a stigmatized property can help to alleviate the fear of the unknown for a buyer and demonstrate the seller’s due diligence.
Finally, business can also be obtained from civil engineering firms, surveying companies, and some governmental agencies.
Learn more about stigmatized property appraisal
Interested in appraising stigmatized properties? Learn more with our CE courses, “Appraisal of REO and Foreclosure Properties” and “Complex Properties: The Odd Side of Appraisal.” We also offer a livestream course on “Appraising Complex and Stigmatized Residential Properties” (check your state’s continuing education page for availability). Get unlimited access to these appraisal courses—and much more—when you become an Unlimited Learning Member.
Editor’s note: This post was originally written by Carole McCullough in 2017 and updated with significant revisions in February 2024.
