How to buy a house that has a bad reputation

If a crime or some other tragic or violent incident has occurred at a home, it may become known as a stigmatised property. This can have implications for real estate agents attempting to sell the property, and if they fail to disclose a ‘material fact’ that could put a potential buyer off, they could face hefty penalties.

Content warning: This article discusses incidents that some readers may find distressing, including references to suicide. If you need support, or you know someone who does, you can call Lifeline on 13 11 14 or Beyond Blue on 1300 22 4636 for confidential advice and mental health support.

In July 2001, in what would become one of Australia’s most infamous crimes, 20-year-old Sef Gonzales murdered his parents and sister in the family’s home in the Sydney suburb of North Ryde. He was motivated in part by a desire to inherit his parents’ wealth, and would eventually be handed three life sentences without parole.

The family home sat on the market for three years, before a couple agreed to purchase it for $800,000 in 2004. Agents from a local L.J. Hooker, however, reportedly never told them about the property’s grisly past. The buyers only found out about it by chance when they saw a newspaper article about the sale of “Sef’s death house”, and realised it was their new home.

The couple, who were “terrified” to live in the house after learning about what had happened there, demanded and eventually received a refund of their $80,000 deposit. L.J. Hooker was handed a hefty fine as a result of the incident, with the NSW Office of Fair Trading finding that they had engaged in “misleading behaviour” to sell the property.

The four-bedroom home eventually sold for $720,000, well below the original listed price. The buyers were a local family who had been made aware of the murders, but were undeterred, telling Woman’s Day that they were able to purchase the house for a considerably reduced price as a result of the events that had occurred there.

What is a stigmatised property?

A stigmatised property is a house or other dwelling that has a bad reputation of the kind that might influence someone’s decision to purchase or live in the home. This reputation may be due to a violent or traumatic event that occurred there in the past, a notorious former resident who may have lived there, or some other similar factor.

A stigmatised property may not necessarily have any physical defects, and may even be in excellent condition, but people may still be reluctant to purchase or live in the home, thanks to the psychological stigma that may be attached to whatever past event occurred.

What factors can lead to a property being stigmatised?

There is no definitive list of things that can contribute to a property having a bad reputation, as the concept is somewhat subjective. Sometimes, a house may be infamous if it has appeared in news reports, such as the one formerly owned by the Gonzales family. At other times, a traumatic event may have occurred there that was not as well-publicised, such as a former resident’s suicide. A past event that might discourage one buyer from purchasing a property might not be a hindrance for another.

In general, however, events that might lead to a property being stigmatised could include:

• a murder or violent crime
• a suicide
• criminal activity related to drugs or domestic violence incidents
• rumours of a ghost or supernatural activity
• an infamous former resident such as a killer
• a former resident who was frequently visited by debt collectors.

What do agents have to disclose about a property?

The Australian Consumer Law offers a variety of protections for consumers, including purchasers of houses. The law makes it illegal for businesses to engage in any conduct that misleads or deceives or is likely to mislead or deceive consumers, or engage in unconscionable conduct. According to the Australian Competition and Consumer Commission (ACCC), if a seller fails to disclose information that might “significantly change” a customer’s mind about the purchase of a product, they may have engaged in misleading or deceptive conduct.

How would this work in the context of a stigmatised property? When it comes to real estate purchases in Australia, there is no uniform law, although states like Victoria and NSW do have legislation requiring agents to disclose “material facts”, including events such as murder that could affect a potential buyer’s decision. In other parts of Australia, the law is less clear as to whether real estate agents are required to disclose this sort of information, but it is still possible a prospective buyer in this situation may be able to take legal action against a seller or real estate agent under the Australian Consumer Law.

Property lawyer Tim O’Dwyer told Domain that “a material fact is a fact that would be important to a reasonable person in deciding whether or not to proceed with a particular transaction.” If an agent knows a fact about a property’s past and this fact may sway a potential buyer’s decision to purchase said property, then this fact may well be considered material.

Mr O’Dwyer told Domain that buyers who unwittingly purchased a stigmatised property without being told about its past may potentially be able to sue the agent who sold it to them. This could potentially lead to outcomes such as the contract being set aside, the deposit being refunded, and the real estate agent facing a fine, as was the case when the former Gonzales house was sold.

What should you do if you are concerned about a property’s past?

The laws concerning disclosure around properties differ from state to state. In Victoria, for example, real estate agents are forbidden by law from knowingly concealing any material facts about a property, such as whether it was the site of a murder or drug lab. Likewise, in New South Wales, the law forbids real estate agents from failing to disclose certain material facts, such as whether “within the last 5 years the property was the scene of a crime of murder or manslaughter”.

If you are a local resident, as the buyers were in the case of the Gonzales family’s former home, you may already have some awareness as to the history of a particular property. If you are unfamiliar with the suburb or the area you are buying, however, you may not have this kind of knowledge. In either case, if you are concerned, you may wish to simply ask the real estate agent if they are aware of any material facts about the property’s history that might influence your decision to purchase it.

Cover image source: Andy Dean Photography/Shutterstock.com