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Do You Have to Disclose a House is Haunted?

By:
Sep 7, 2016

Disclosures

Question:
An agent gets a call from a prospective client and schedules an appointment to make a listing presentation. During the listing presentation, a rather desperate seller informs the agent that her family wants to sell the house as soon as possible. The seller explains that a ghost is haunting their house. The seller's family is so distraught that they have moved out of the house and are staying with friends in the area. The seller explains that she wants a quick sale regardless of the price.

The listing agent admits that this sounds "a little wild." However, the agent takes the listing and begins marketing the property at the price set by her client. The listing is entered into the Multiple Listing System and an open house is scheduled for the weekend. During the open house a young man with a scruffy appearance enters the property and asks the listing agent for a tour. After taking the prospective buyer around the house the listing agent asks for the sale. Unfortunately, she gets a rather disconcerting answer.

"Yes, my dog Scooby-Doo will love this place. I will give the seller whatever they want if they will let us move in right away. Scooby doesn't like the spooky mansion where we currently live because it is haunted by a ghost. We want to live in a nice, quiet home with no ghosts."

Now the listing agent wants to know if she was obligated to disclose the information about the ghost to the prospective buyer.

Answer:
First, let me admit that I made up the part about Scooby-Doo. Unfortunately, the rest of this is frighteningly true, though a few details from multiple calls have been combined and altered to protect the identities of those involved.

Second, some people may believe in ghosts and other people may be skeptical. However, in the spirit of Halloween and for purely educational purposes, let's just skip the question of "Do ghosts exist?" and focus on the ethical issues involved.

Article 2 of the Code of Ethics and Standards of Practice does prohibit REALTORS® from exaggerating, misrepresenting or concealing pertinent facts relating to the property or the transaction. Standard of Practice 2-1 clarifies the article by stating that REALTORS® are only obligated to discover adverse factors reasonably apparent to someone with expertise in those areas required by their real estate license. Please note that this obligation goes beyond REALTORS® normal, legal obligation to disclose " all material adverse facts pertaining to the physical condition of the property which are actually known by the licensee" (Code of Virginia д 54.1-2131).

Appendix II to Part Four of the Code of Ethics and Arbitration Manual states, "Absent a legal prohibition, any material fact that could affect a reasonable purchaser's decision to purchase, or the price that a purchaser might pay, should be disclosed as required by Standard of Practice 2-1 if known by the REALTOR®, again, unless prohibited by law or regulation." This is supported by Standard of Practice 2-5, which states, "Factors defined as 'non-material' by law or regulation or which are expressly referenced in law or regulation as not being subject to disclosure are considered not 'pertinent' for the purposes of Article 2." This limits the scope of Article 2 by exempting any factors that are defined as non-material by law or state regulation.

There is a state law that expressly references the disclosure of information related to ghosts and other stigmatizing events. Section д55-524 (Virginia Residential Property Disclosure Act) of the Code of Virginia states the following:
A. Notwithstanding any other provision of this chapter or any other statute or regulation, no cause of action shall arise against an owner or a real estate licensee for failure to disclose that an occupant of the subject real property, whether or not such real property is subject to this chapter, was afflicted with human immunodeficiency virus (HIV) or that the real property was the site of:

1. An act or occurrence which had no effect on the physical structure of the real property, its physical environment, or the improvements located thereon; or

2. A homicide, felony, or suicide.

Virginia's Seller Disclosure law defines stigmatizing events (such as ghosts, murders, etc.) that had no material effect on the property as non-material. Standard of Practice 2-5, combined with this disclosure law, releases Virginia's REALTORS® from the obligation of disclosing stigmatizing events.

Although you are not obligated to affirmatively disclose this information, you are still required under Article 1 of the Code of Ethics and state law (д 54.1-2131 B) to be honest with all prospective buyers. If the buyer in this case had directly asked about the presence of ghosts, the listing agent would be prohibited from providing any false responses to this question.

When listing agents ask for my advice on how to respond to such a direct question, I recommend avoiding the question. I recommend the following truthful but evasive response: "Ghosts, suicides or alien abductions are defined as non-material under state law, and agents are advised to avoid discussing non-material facts that stigmatize a property." It is important to avoid providing any answers that can be viewed as denying the existence of ghosts in this situation because that could open up a dispute over the honesty of such answers.

Many buyers become very upset when they learn that agents do not have an obligation to disclose the fact that the house is haunted. The buyers eventually will discover the issue, probably the first time they meet the neighbors. Please react professionally if a buyer becomes upset. It may help defuse or refocus their anger if you refer them to the statutes referenced above or provide them with a copy of this article. You also can refer their questions and concerns to the Professional Services Department if you need any help explaining this information to irate buyers. However, no matter how angry the buyers get, please don't tell them to "call Ghostbusters" if they want to take care of the ghosts. That one I did not make up, though I really wish I had.
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