With the crisp Autumn leaves falling from the trees and candy flying off the shelves comes the old October question:  Trick or Treat?  Certainly when dealing with a real estate transaction you hope for a treat. I was watching an old favorite Halloween movie (the Addams Family) the other day with my family when suddenly I had reminiscence of a test question in real estate school.  In class we learned that, essentially, if you found yourself with a haunted house that you didn’t know what to do with… you could basically put it on the market and sell it without having to disclose the fact that it was haunted!  This was something I took upon myself to specifically remember in the event one of my clients ever asked this question.  You know, just in case.

Psychologically Affected Properties is a real estate term used to describe a property that is for sale or lease where one or more of the following have occurred, or could reasonably be suspected to have occurred:

  • A resident of the home had or died from an illness related to HIV.
  • Someone died on the property.
  • Criminal gang activity took place on the property.
  • There was a shooting involving law enforcement at the home.
  • Illegal drugs or controlled substances were manufactured on or sold from the residence.*1
  • A felony under Indiana IC 35 occurred on the property. IC 35 covers 19 articles with crimes ranging from theft to violence with bodily harm.

The Indiana Code detailed in Title 32, Article 21, Chapter 6 outlines that property owners are not required to disclose any knowledge of an event that would result in what is described as psychologically affected properties.  But, if a prospective Buyer of the property directly asks the property owner or the respective real estate agent about the status of the property and any psychologically affected properties… they must answer truthfully.

When you list a property professionally with a real estate agent, you may be asked to complete what is a called a Sellers Disclosure.  This document outlines certain aspects of the home that may or may not be in need of repairs or malfunctions such as the attic, chimneys, fireplace, appliances, electrical outlets, ceiling fans, basement leaks, etc.  One thing you will notice in this reasonably extensive document is the fact that it does not mention any thoughts or ideas regarding the property and any of the psychological aspects of the property that could have occurred above. This, by Indiana Code the Seller of the property is not required to disclose any of this information to Buyers unless asked directly. (*1 – With the exception of manufacture of methamphetamines or controlled substances as outlined on the second page, top left corner of the Indiana Residential Sellers Disclosure).

Though it may seem as if a Seller can legally without this information from Buyers for the most part, there is a reason for it being that way.  When a Seller and Buyer connect for the sale of real estate both parties are focusing on the material value of the property at hand and any improvements upon that real estate that are included in the sale.  That’s it.  The value/appraisal of the property has absolutely nothing to do with any of the aforementioned psychotically affected possibilities.  If someone had passed away in that property, it does not reduce the value of it… likewise, if the house is considered haunted by the current occupant, it does not necessarily reduce the material value of the property.  Au contraire, it could actually mean that the property could sell for a higher sales price!

In closing, as a Seller it is always best to disclose any known defects and items of the property you are aware to be defective to a perspective Buyer.  To be blunt, the Golden Rule likely applies:  if you would like to know about a specific defect or any knowledge of a property you would be purchasing, it is probably best to disclose that information to your Buyer.  Less, you be HAUNTED by any repercussions of withholding that information after the fact!

If you have questions regarding your property and any possible psychological affected disclosures, please feel free to reach out to our team at JF Property Group.