When it comes to real estate, some properties are just better than others. Maybe this house has a better view than the others. Maybe this one has a nice swimming pool. Maybe this one has a really cool wraparound deck. All of these factors drive up how desirable a property is, and how much a seller can charge.

That cuts the other way, too. Some properties are less desirable than others for many reasons. Here we’re going to discuss the “not so desirable” side of the equation. These properties are often referred to as “stigmatized.”

Pro Tip: Whether your property is stigmatized or not, you’re going to want the best insurance available. Cut to the chase by reading our Lemonade Insurance review — it’s one of our favorite homeowners insurance providers on the market today.

What Is Stigmatized Property?

A property that is stigmatized is one that is deemed undesirable for reasons unrelated to the condition or features of the property. What do we mean by that? Well, it’s not that the roof is leaking; it’s that the previous occupant was a major drug dealer in the area, and the house was on TV when the police raided it last month. Get the difference?

We’ll break it down a little more and give you some examples of why properties might be considered stigmatized. It depends on who you ask, but generally speaking there are six main types of stigmatized properties.

  • Criminal stigma: If the property was used in the commission of a crime, it can be considered criminally stigmatized. For example, if the owner sold drugs out of a home, addicts might come back after they’ve moved.
  • Debt stigma: If the previous owner wasn’t paying their bills and skipped town, the new occupant might be hounded by debt collectors looking for information. This would be considered debt stigma.
  • Minimal stigma: This is a stigma that would only make a property undesirable to a select group of people. An example would be if someone died of a terminal illness inside the home.
  • Murder or suicide stigma: This stigma is associated with a property where someone took someone else’s life or their own.
  • Public stigma: This type of stigma applies if a property has a negative association that would be known to many in the community. For example, if a child predator lived at the address, it could be considered a public stigma.
  • Phenomena stigma: Believe it or not, some folks considered a “haunted” property to be stigmatized. There’s a good reason for this, even if you’re the skeptical type. Perceived ghost sightings can be an indicator of environmental hazards like carbon monoxide or toxic mold.

Pro Tip: If you don’t want to be visited by your long-dead great-grandfather in the middle of the night, you might want to have your home checked for mold. Learn more about that in our guide to mold insurance.

Now that you’re starting to get an understanding of what qualifies as a stigmatized property, let’s run through some examples to make it a little more clear.

What Are Some Famous Examples of Stigmatized Property?

You’ve probably heard of quite a few stigmatized properties in popular culture. One of the most famous examples is the Lutz home in Amityville, New York.

On Nov. 13, 1974, Ronald DeFeo Jr. shot and killed six members of his family at the home on 112 Ocean Ave. In December of the next year, George and Kathy Lutz moved their children into the house, only to flee after 28 days, complaining of being tormented by paranormal phenomena.1

Author Jay Anson wrote a book about the ordeal, which was later turned into a series of films. Although it was framed as a “true story,” lawsuits and controversy have arisen over the account’s legitimacy.

The “Amityville Horror” house still stands today, although it has been heavily renovated and the address has been changed to prevent unwanted visitors. A classic example of a stigmatized property if there ever was one.

Sometimes homes are so heavily stigmatized, though, that they’re demolished entirely, as was the case with O.J. Simpson’s California Brentwood, California mansion.

Pro Tip: Preventing crime is one way to make sure your property doesn’t become stigmatized, and one of the best ways to do that is to invest in some security measures. If you’re looking to get started, read our security camera buyers guide first.

Simpson was embroiled in the high-profile murder case of his ex-wife Nicole Brown Simpson and her friend Ron Goldman in the mid-90s, and the property where the crime took place was eventually sold. The buyer demolished the property in 1998 and established a new address to prevent tourists and media from snooping around.2 Another way to deal with stigma, apparently.

By now you should have a pretty good idea of what we’re talking about when we say “stigmatized property.” However, there’s another term that’s thrown around in these conversations — so-called “problem properties.” Is there a difference between the two, or can the terms be used interchangeably?

What’s the Difference Between a Problem Property and Stigmatized Property?

While both “problem property” and “stigmatized property” generally mean the same thing, the context defines which term will be used. Most of the time, a “problem” property is one that is currently undergoing what would later cause it to be stigmatized.

What do we mean by that? A city government or law enforcement agency might describe a property as a “problem” if there is drug or gang activity occurring there, or the property is blighted or abandoned. A “stigmatized” property is a more narrow concept and is generally used when that problem property goes up for sale. “Problem” property is usually a municipal term, whereas “stigmatized” property is more of a real estate term.

Now most of the causes of stigma are pretty easy to wrap your head around. People might not want to live in a house where criminal activity was recently taking place, and a house where a suicide occurred might creep them out. But let’s talk about that more … esoteric one.

Can Houses Really Be Haunted?

It’s beyond the scope of this article to defend or deny the existence of the paranormal. Some buyers might believe in ghosts, some might scoff, but when it comes to what qualifies as a “stigma,” — and therefore be bound by local disclosure standards — it gets pretty interesting, regardless if you believe or not.

In what was famously referred to as the “Ghostbusters Ruling,” a case in the New York Supreme Court Appellate Division held that a house that had previously been advertised to the public as being haunted was grounds for the purchaser to be released from her contract.

FYI: You can actually purchase paranormal insurance policies from some brokers, but we’d imagine it’s difficult to prove damage to your home was caused by a poltergeist. To learn more about the ins and outs of the industry in this realm, read our homeowners insurance buyers guide.

Long story short, while the purchaser — Jeffrey Stambovsky —  did not believe in ghosts, he did believe that the local legends of Revolutionary War-era ghosts could potentially hurt the resale value of the Nyack property he was in the process of purchasing. The courts agreed, and real estate laws in New York briefly changed, requiring the disclosure of a home’s “haunted” status.

So where does that leave you, the purchaser, in regard to stigmatized property? Will the seller be bound to tell you about bed-rattling poltergeists or that the previous owner welched on his credit card bills?

Does a Seller Have to Disclose a Stigmatized Property?

There’s controversy in the real estate industry on what exactly qualifies as a stigmatized property and what types of stigma need to be disclosed to potential buyers. Legally speaking, some jurisdictions have passed resolutions and statutes to address the issue.

For example, in North Carolina, sellers and agents do not have to volunteer information about the violent death of a previous occupant but must answer truthfully if directly asked. In Florida, however, no notification is required. Similarly, some states require sellers or agents to disclose if the property was used in the manufacturing of methamphetamine, as the chemicals used in that process can linger and cause health problems.3

The short answer is that the seller’s responsibility to disclose varies from state to state, and even then, it’s not set in stone. If you’re concerned that you might be interested in unknowingly purchasing a stigmatized property, you should look up local disclosure laws and speak with your real estate agent.

While a stigmatized property might turn off some buyers, others might see dollar signs. If a property you’re interested in buying has a stigma attached to it, you might be able to save money on the deal.

Is Stigmatized Property Cheaper?

While some folks might be too creeped out knowing that their new home was the site of a murder, it doesn’t bother other buyers — especially when they see the reduced price.

A study by Wright State University found that stigmatized homes sold for 3 percent less on average and took about 45 percent longer to sell compared to “untainted” properties,4 but those figures can swing pretty wildly depending on the area and the type of stigma. Randall Bell, a California real estate agent, said that in his experience stigmatized properties can bring 10 to 25 percent less than “normal” comparable properties. If you’re okay with the stigma associated with the property, you might be able to use it as leverage to drive the price down.

That said, certain types of stigma might also attract buyers. In the haunted house example above, the popularity of the case in the media had potential buyers clamoring to cohabitate with the undead. It’s reported that after Stambovsky backed out, the seller had dozens of offers flood in specifically because the house was haunted.

At the end of the day, stigmatized property and its associated value is all about perception. Will that perception give you trouble when you’re trying to insure the property, though?

Can You Insure Stigmatized Property?

The short answer is yes. Since “stigma” has to do with attitudes and perceptions and not physical attributes, you shouldn’t have much trouble insuring a property. We’re sure there are outlying cases where insurers refused to cover a property because of its reputation, but in our research we weren’t able to pinpoint any notable examples. Simply put, if you decide to purchase a home with a bad reputation — and a bad reputation alone — you shouldn’t have any trouble purchasing homeowners insurance.

Pro Tip: If you’re in the market for homeowners insurance, you should consider reading our breakdown of the top providers of 2022. There you’ll  find a company to fit most every need and budget.

That said, if you purchased a problem property — like one that was abandoned for a long period of time or is prone to flooding — you might run into some challenges or have to pay higher premiums. But you’re less likely to be penalized for the ghost roaming the halls at night than you’d be for the leaky roof.

So now that you know all there is to know about stigmatized property, let’s bring it all home.

Final Thoughts on Stigmatized Property

One of the main things to keep in mind about stigmatized property is that it’s all about perception. Stigma has nothing to do with the material features of a property, and everything to do with the attitudes surrounding it.

Those attitudes, though, can certainly have an impact on the property’s value. If you’re okay with the perception, you might be able to save money if you choose to buy a stigmatized property. You also shouldn’t get dinged when you try to insure it, either. If the stigma doesn’t bother you, it can actually work out in your favor. Just keep plenty of sage and cedar oil on hand to ward off those evil spirits.

Stigmatized Property FAQs

Is it safe to buy stigmatized property?

It’s up to the buyer if they can live with the stigma of a property. If the reason for the stigma is acceptable to them, though, they can usually save significant money on the purchase.

Will homeowners insurance cover stigmatized property?

Yes. Since stigma has to do with perception rather than a property’s physical characteristics, it shouldn’t impact your homeowners insurance premiums.

Is a property that floods stigmatized?

No. Properties that have physical issues like flooding, zoning issues, or construction defects might be considered “problem” properties, but they wouldn’t be considered stigmatized.

How do I know if my property is stigmatized?

The best way to find out if a property is stigmatized is to ask the seller and the seller’s agent at the time of purchase. You can also Google the address or look through news archives at your local library.

Does a real estate agent have to tell me if a house is haunted?

There are no states where a seller is required to voluntarily disclose if paranormal activity has been reported in a home.