Disclosure is optional; Agents for sellers are under no obligation to tell buyers of latent defects or stigmas
By Ellen Mitchell. Ellen Mitchell is a freelance writer.
Newsday (New York) May 13, 2005 Now playing at a movie theater near you: "The Amityville Horror," 2005 edition.
There may not be a soul left who hasn't heard about the green-eyed pigs, disembodied voices and oozing slime that overly imaginative moviemakers claim once possessed that notorious house in Amityville. But suppose it's your own home that has a skeleton or two in the closet and you're trying to sell it. Must you share your secrets with a prospective buyer?
With the spring real estate market in full swing, many buyers don't realize how little a seller is required to reveal about what may be a dream house - or money pit - experts say.
"New York State is a non-disclosure state," said Michael Moberg, a real estate attorney in Uniondale. "It means there is no onus on a real estate broker or a homeowner to disclose anything such as a crime or stigma."
New York does have a disclosure form that asks a seller to reveal to the buyer such things as age and condition of the house, past major repairs and environmental concerns. Nowhere does it address whether the house has harbored a heinous crime, a suicide, a string of mysterious illnesses or whether a ferocious dog lives next door.
In fact, the seller can bypass the disclosure form by simply giving the buyer a $500 credit. Most real estate attorneys advise clients to pay it to avoid making a misstatement "that may come back to bite you" in the form of a lawsuit, Moberg said. Brokers can keep mum
Real estate brokers need not disclose hidden stigmas in a house either, says Audrey Bloom, a real estate attorney in Smithtown. She said real estate agents are guided by the Code of Ethics and Standards of Practice of the National Association of Realtors, a Washington trade group. "It's the duty of the Realtor to avoid exaggeration, misrepresentation or concealment of pertinent facts relating to the property. However, the Realtor has no obligation to discover latent defects," Bloom said.
"Latent defects" include oddities or stigmas that go beyond the structural soundness of a house - such as a suicide in the guest room or a break-in and armed robbery. Additionally, most agents in this state represent the seller rather than the buyer. They rely on what the seller is telling them, and they are obligated to act in the seller's best interest. New York is a "caveat emptor" state, meaning "buyer beware." But it's perhaps better described as "buyer be aware," said Bloom. "The duty is on the buyer to discover everything about the property, not to just go in relying on what they are told by either a Realtor or a seller." According to Howard Goldson, general counsel to the Long Island Board of Realtors, New York State has a Stigmatized Property Law. It requires that, if a prospective buyer specifically asks about latent house stigmas, the real estate broker is obligated to ask the buyer to put the question in writing to be submitted to the seller. The seller has the option to answer or not, but a refusal should be a signal to the prospective buyer that further investigation is warranted.
Such a written request is rarely used, according to Lee Rothleder, director of sales for the Great Neck office of Prudential Douglas Elliman.
Looking for secrets
"We have to treat the buyer fairly," she said. "If a buyer specifically asks about something and we have knowledge of it, we reveal it. But I don't ever remember anyone asking me about something like a stigma, and I've been in the business 35 years."
Some buyers are becoming more sophisticated about uncovering a home's secrets.
"Buyers are much more educated than they were years ago, because they have the Internet," said Mary Adams, real estate broker with Century 21 in Babylon. "They'll do their own investigating. They'll go to the precincts. They'll go to neighbors and knock on doors to see what's going on."
Indeed, that's probably the only way a buyer would learn whether a pedophile lives in the neighborhood or that a home's occupant had a disease, which Realtors are mandated by law not to disclose.
Laura Ahearn, executive director of Parents for Megan's Law, advises prospective buyers to check the group's Web site, which lists Level 2 (moderate-risk) and Level 3 (high-risk) sex offenders. The address is www .parentsformeganslaw.com html /offender.lasso. Ahearn's group has lobbied unsuccessfully for a state law that would require Realtors to inform buyers how to research sex offender registration.
Just what influence a stigma might have on the monetary value of a house can range from little to having to raze the structure, as was done with the New Jersey home where Megan Kanka was raped and murdered.
"If enough people know something happened in a house and the sellers aren't getting an offer, we might say, adjust the price," Adams said. "The most I've ever seen a price had to be adjusted is 10 percent."
Attraction of notoriety
Some houses, despite their notoriety, will attract buyers who don't care about the history of the place or are drawn to it as a curiosity. The Brentwood, Calif., condominium outside which Nicole Brown Simpson and Ronald Goldman were slain was eventually sold for nearly $4 million. The Miami estate where Gianni Versace was murdered was auctioned off for $20 million. Even the "Amityville Horror" house, where Ronald DeFeo murdered his parents and three siblings in 1974, has changed hands. The house sold in 1975 for $80,000. The current owner, according to Suffolk County records, paid $310,000 for the house in 1997.
There have been very few "house stigma" lawsuits in New York. A Baldwin couple sued after discovering that a convicted sex offender lived across from the house they purchased. The courts said neither the seller nor the real estate agent was required to disclose that. In Nyack, however, a state court ruled a seller had to return her buyer's deposit because, although she had written an article in Reader's Digest stating her home was inhabited by ghosts, she withheld that little tidbit from her buyer.