Should You Avoid Buying A Stigmatized Property?
A stigmatized property is a property that has fallen in value due to an incident or crime that has taken place on the premises, which could, in turn, affect a potential owner’s desire to live in the property. It has no bearing whatsoever on the condition or aesthetic appeal of the property.
Stigmatized properties will often have trouble attracting a buyer.
What Causes A Property to Be Stigmatized?
There are many reasons why a property could be stigmatized, including the following:
Murder or suicide—many potential home buyers will avoid a property where a murder or suicide has taken place. Despite the fact that crime scene cleaning companies (such as Emergency Cleaning Solutions) can remove all traces of such an event using bio-hazard cleaning products, many people believe that trauma can linger in a home long after the event has taken place. Highly publicized events will have a particular impact, and when asked by potential buyers, it is the responsibility of the agent or seller to disclose such information.
Criminal stigma—whilst this can cover murder, it also applies to properties that have been used for illegal drug activity, prostitution, kidnapping, domestic violence, gang activity, or sexual assault. When considering a property with this type of stigma you should think about whether there may be undesirables appearing at your front door in relation to the property’s previous use.
Paranormal stigma—this type of stigma is related to the perception that there is paranormal activity attached to the property. Of course, this is difficult to prove or disprove, and whilst a large proportion of the population would be discouraged by such a stigma, others would be happy to disregard such claims.
Debt stigma—it is worth checking whether a previous owner has been hounded by debt collectors, as this can somewhat unfairly pass to the new owners as they deal with debt collectors and poor credit attached to the address.
Public intrigue stigma—if your property has been linked to a hit show, or a much-publicized event, this can cause disruption to new owners. As an example, the home of Walter White in Breaking Bad became such a hot spot for fans of the show that the new owners became fearful of leaving their home unprotected.
How Much Does This Affect the Value?
It is tricky to place a value on a stigmatized property, but depending on the stigma involved, there can be a reduction in price by up to 20% of the previous value. Furthermore it can often take up to 45% longer to sell a stigmatized property. However, with time and patience, it can often be an investment to purchase a stigmatized property and renovate it to a degree that it no longer resembles the original building, hence removing the stigma and affording the home owner a profit on the resell of the property. However, potential buyers should also consider the stigma of the area surrounding the property. Violent or criminal neighborhoods will be difficult to shake off, and these kinds of properties should be avoided if you are looking to flip the property for profit.