I signed a sales contract to buy a home in Detroit. A few weeks later I discovered the previous tenant had been running a dogfighting ring out of the house. The place was raided and several people were arrested on felonies. They found a couple of badly injured dogs and blood all over. I want to back out based on non-disclosure. The seller wants to sue me for not going forward. Do I have a plausible reason to back out? -- Thomas R.
Response: In California, there are disclosures laws that might be able to be enforced under neighborhood nucience violations but you would need to go to a real estate attorney that knows about real estate law in Michagan. For California, there is no clear duty to disclose that a property is thusly psychologically stigmatized, which certainly should be brought to the forefront for correction.
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Though it may require different rationale, Buyers who want out of a bad real estate deal often can find misrepresentations on the Seller's Disclosure Form. Review all contracts thoroughly and ideally with legal representation.
It's worth noting that laws on stigmatized properties vary greatly from state to state. There are a few basic stigmas, though only one is always clearly actionable.
Public stigma, which is known to a wide portion of the population. These must always be disclosed. Examples include the "Amityville Horror" case, in which a man killed his parents and four siblings, and the Heaven's Gate mass suicide.
Murder and suicide stigma. Disclosure isn't always mandatory. (It is in California, but not in Florida, for example.)
Phenomena stigma, involving repeat paranormal events reputed to occur at a home.
Debt stigma, which can result in debtor harassment of new occupiers.
Minimal stigma, typically known to just a small group, usually neighbors. These last two are seldom disclosed.
Then there's the one that applies to your under-contract home: the "criminal stigma." Alas, not all jurisdictions require sellers to disclose even these. However, sellers everywhere are not allowed to deceive buyers in response to direct questions about crime or just about any other condition or stigma at a home. Had you asked the sellers whether any crimes were committed at the residence and they or their agent said no, you'd have clear basis to back out -- or to sue for fraud if you have already closed on the deal, so it's always important to get expert advice.
Most municipalities have some kind of crime-statistics map on the website of either the local police or sheriff, or both. This gives you a sense of what crimes are occurring in an area. And if you call with a specific address, most cities will tell you if there's a record of a crime committed at that residence. If nothing shows up, ask sellers direct questions about such activities there anyway (and while you're at it, if there are any sex offenders in the neighborhood).
When receiving real estate advice, individuals should always seek their own legal and tax advice pertaining to each persons financial portfolio.