If someone dies in a house, does that decrease the value of the house?

I will preface my answer by stating that I am a licensed RealtorÂ® in the state of Arizona.

Here is what the National Association of RealtorsÂ® states:

PROPERTY DISCLOSURE

Stigmatized Properties

In addition to physical defects, some properties have unusual features or histories that may negatively affect the value or salability of the property. For example, if a murder took place at the home, the stigma of that event may prompt some buyers to be unwilling to buy the property.

Some state laws explicitly relieve the salesperson or broker of the obligation to disclose certain property stigmas. Where that is not the case, failing to disclose a stigma presents a risk of later charges of misrepresentation. When selling a stigmatized property, remember to:
Â·Determine if the reasons for the stigma are factual.
Â·Check state law to determine if disclosure of the stigma (for example, suicide, homicide, or prior residents with AIDS) is specifically excluded.

TIP: Persons with AIDS or who are HIV positive are protected under federal fair housing laws. For this reason, the U.S. Department of Housing and Urban Development has declared it illegal to disclose that the current or former occupant of a property had AIDS or was HIV positive. In Property Disclosures: What You Need to Know Training Kit, (At the REALTOR.org Store, use the search function to bring up the title.) the NATIONAL ASSOCIATION OF REALTORSÂ® suggests that if you are asked a direct question on this subject, you can inform the buyers that by answering you might be in violation of the federal fair housing laws and that if they wish to pursue the question, they must investigate on their own.
Â·If state law does not address and resolve the question of disclosure, determine the materiality of the stigma. Ask yourself if knowledge of the stigma would affect the willingness of a reasonable person to buy the property or would change the amount that person was willing to pay.
Â·Discuss the disclosure with the sellers if you decide that the stigma is a material one that must be disclosed.
Â·Disclose stigmas you determine are material, but do so judiciously. Explain them only to seriously interested potential buyers.
As well as:

AIDS DISCLOSURE AND OTHER STIGMAS

Agency disclosure, property condition disclosure - what other kinds of disclosures do real estate professionals need to make to consumers? How about stigmas such as murders, suicides, or AIDS? Do these factors need to be disclosed during the real property transaction?

The NATIONAL ASSOCIATION OF REALTORSÂ® defines stigmatized property as: "a property that has been psychologically impacted by an event which occurred, or was suspected to have occurred, on the property, such event being one that has no physical impact of any kind."

In other words, when dealing with a stigmatized property, real estate agents are not dealing with facts about physical characteristics -- they are dealing with the fears of a potential purchaser. The most common events associated with stigmatized property are murders, suicides and criminal activity. Stigmatized property also includes property in which a current or former occupant has been infected with HIV or diagnosed with AIDS.

AIDS DISCLOSURE

The 1988 Fair Housing Act Amendments established the handicapped, which includes people diagnosed with AIDS, as a new protected class. It is now illegal to discriminate against people with handicaps just as it is illegal to discriminate on the basis of race, color, religion, sex, national origin or familial status.

According to the Department of Housing and Urban Development (HUD), it is illegal for real estate agents to make unsolicited disclosures that a current or former occupant of the property has AIDS. If a prospective purchaser directly asks an agent if a current or former occupant has AIDS, and the agent knows this is in fact true, HUD advises that the agent should not respond. NAR advises that the agent respond as follows:

It is the policy of our firm not to answer inquiries of this nature one way or the other since the firm feels that this information is not material to the transaction. In addition, any type of response by me or other agents of our firm may be a violation of the federal fair housing laws. If you believe that this information is relevant to your decision to buy the property, you must pursue this investigation on your own.

OTHER STIGMAS

Although federal law provide guidelines for handling AIDS disclosures, there are still grey areas surrounding disclosures of other stigmas. When a property defect is physical, disclosure is mandatory in most states. When the defect is an emotional stigma, however, disclosure becomes dependent on materiality. The following guidelines are designed to help a listing agent, when faced with information regarding a potential stigma, determine whether or not a stigma is material to a particular real estate transaction.

STEP #1

Determine whether the information is fact or fiction.

Investigate the sources of the information, e.g., check newspaper accounts, talk to neighbors, etc. Separate rumor from reality. If the stigma is based on rumor and not on fact, you are under no obligation to disclose. If, on the other hand, the stigma turns out to be factual, e.g. there was in fact a murder, you should proceed to the next step.

STEP #2

Check state laws.

Many states have enacted laws that generally apply to AIDS, homicides, or suicides, and provide that the stigma is not a material factor which needs to be disclosed.

If a state does not have a specific law governing disclosure of stigmas, there may be other laws, such as privacy laws, that influence or affect disclosure decisions. State statutes vary widely, however, so it is essential that an agent be familiar with the laws of his state.

If there is a law governing disclosure, it will probably state that you have no duty to disclose. Because there is no disclosure obligation, investigation into the issue ends here. If there is no law governing disclosure, proceed to Step #3.

STEP #3

Determine materiality.

To analyze the materiality of a stigma, you should ask yourself this question: would knowing about the stigma affect the willingness of most people to buy the property or reduce the amount of money they would pay for the property?

Most stigmatized property cases involve stigmas that are less sensational than say a multiple-murder. Less sensational stigmas may or may not impact on the market value of the property. However, it is your job to make an analysis of what a reasonable person would do with this information. Would a reasonable person be willing to buy the property knowing about the stigma? Or, would a reasonable person pay less for the property knowing about the stigma?

If, at this point in the analysis, the answer is yes to either question, you have concluded that the stigma is a material fact which should be disclosed.

STEP #4

Discuss disclosure with the sellers.

Go back and talk to the sellers about what you have determined. Walk them through your analysis and show them why this particular factor may make a difference in the sale of their property.

If the sellers agree to disclose the stigma, make the disclosure judiciously. It is not necessary to disclose information about a stigma to those who simply express interest in the property. The best time to disclose is at the contract proposal stage. Present the subject as one more relevant piece of information about the property and use simple non-threatening language.

If the sellers disagree and refuse to disclose what you have determined to be a material factor regarding the property, you will need to give up the listing. Because the sellers are your clients, you cannot disclose information that they have specified should remain confidential without violating one of the duties inherent in your agency relationship with them. However, you may also be in violation of the basic duty to disclose material factors that affect the value or desirability of the property. The best way to handle this dilemma is to give up the listing.

CONCLUSION

Remember, property stigmas are emotional issues that need to be handled carefully. To reduce the legal risks in this area, it is essential that real estate agents:

understand the issues associated with stigmatized property,
know pertinent federal and state laws, and
know how to evaluate facts and make informed decisions about disclosure

All in all you will need to check with your RealtorÂ® and your state attorney general's office to find out what the laws are in your state concerning this type of property. In Arizona for example, we are NOT obligated to disclose if a person died in the house.

I hope that you find this helpful.
Good luck in selling your home!