Stigmatized properties in Maryland have a special type of treatment in the Maryland Code. The National Association of REALTORS® (NAR) defines “stigmatized property” as that which has been “psychologically impacted by an event which occurred or was suspected to have occurred on the property, such event being one that has no physical impact of any kind.” In other words, something happened in that property that didn’t affect the physical condition of the property but could have an emotional or psychological impact on people. Events such as violent murders, human trafficking or famous adulteries that took place in the property fit this category.

Standard Duty to Disclose When Selling Properties in Maryland

The relevant portion of the real property section of Maryland’s Code, Md. Code § 10-702, requires sellers of residential real estate to complete a form—known as the Residential Property Disclosure and Disclaimer Statement—setting forth conditions and defects with the property

In Maryland sellers have a choice either to provide a disclosure of known defects or a disclaimer as to the condition of the house. When using the disclaimer, the seller is offering the property “as is,” but must disclose any known latent defects.  The seller should be the only one to complete the disclosure or disclaimer form.

You will still be expected to list any latent defects in the home about which you have actual knowledge; in other words, issues that you know about (without needing to hire an inspector or the like) but that the home purchaser “would not reasonably be expected to ascertain by a careful visual inspection and that would pose a direct threat to [his or her] health or safety.”

The disclaimer also states that, except for the disclosed latent defects, you make “no representations or warranties as to the condition of the real property or any improvements” on it.

In a seller’s market, there are more disclaimers than disclosures.  Providing a disclosure opens the seller to some risk if the buyer discovers something post closing that the seller should have known but did not disclose.  In a balanced or buyer’s market, sellers are more likely to provide a disclosure because they do not want a buyer to think there is something wrong in the house. Buyers appreciate the full-disclosure option, which gives the age of various components of the house, such as the roof and HVAC, and details any material facts of which you are aware that negatively affect the property. This could cover a wide variety of home features, ranging from the condition of the roof to the existence of an underground storage tank.

You are required to provide written copies of the disclosure/disclaimer form to potential buyers

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Exemptions to the Disclosure Form in Maryland

There’s no need to fill out the disclosure form for a home sale if:

  • you’re selling a single family residential real property for the first time, and it has never been occupied or the certificate of occupancy was issued within the previous year (most likely in cases where the seller is a builder)
  • property that’s exempt from transfer tax (§ 13-207 of the Tax – Property
  • you’re a lender who acquired the property either by foreclosure or deed in lieu of foreclosure
  • this is a sheriff’s sale, tax sale, or sale by foreclosure, partition, or by court appointed trustee
  • you’re a fiduciary who is administering a dead person’s estate, guardianship, conservatorship, or trust, or
  • the buyer plans to convert a single-family residential property to non-residential use or demolish it.

Filling Out the Disclosure Form in Maryland

The disclosure portion of the form asks home sellers to answer a variety of questions. You will need to state “yes” or “no” or “unknown” to whether there are any material defects in specific areas—the floors, the walls, the fire sprinkler system, and so on (including an “Other” clause).

The statute lists types of latent conditions that must be disclosed if you choose the disclosure option. For example, Md. Code Ann., Real Prop. § 10-702(e)(2) states that you must disclose the condition of the water and sewer systems, the structural systems, the plumbing, electrical, heating and air conditioning systems, the existence of wood-destroying insects, the presence of hazardous materials, and any other material defects known to the seller.

In addition, you may make comments to explain your answers on the disclosure form. These are a good way to explain any issues, particularly if “yes” or “no” doesn’t tell the whole story. For example, one question asks whether the air conditioning is supplied to all rooms. If you say “no,” this could alarm a buyer. But if you add a comment indicating that all rooms except the basement are air conditioned, this can minimize the impact.

Note that the form also asks you to identify or describe non-defect issues, for example whether the home is under any restrictions from a homeowners’ association, or whether it is located in a flood zone or in a historic district (the latter of which would limit potential renovations).

Stigmatized Properties in Maryland

Whether a seller must disclose information about a stigmatized property varies from state to state.  In Maryland, sellers do not have to disclose that a murder or suicide occurred in the property or that someone died of AIDS.  Section 2-120 of the Maryland Code provides that:
(a)    Under this title, it is not a material fact or a latent defect relating to property offered for sale or lease that:

(1)    An owner or occupant of the property is, was, or is suspected to be:

(i)    Infected with human immunodeficiency virus; or

(ii)    Diagnosed with acquired immunodeficiency syndrome; or

(2)    A homicide, suicide, accidental death, natural death, or felony occurred on the property.

(b)    An owner or seller of real property or the owner’s or seller’s agent shall be immune from civil liability or criminal penalty for failure to disclose a fact contained in subsection (a) of this section.

Interestingly, the statute does not exempt the seller from disclosing ghosts or other paranormal activity in the property.

How to Research a Property’s History

Buyers can explore the neighborhood and the homes they are interested in by doing a Google search of the address of the property, then the name of the street and the names of the sellers.  Additional information can be found through public records by searching deeds, property records and death certificates.

Lastly, to gain further insight on the history of a property and to learn whether a tragedy has taken place, several bloggers recommend www.diedinhouse.com. You can see a sample of the type of reports they do when an inquiry is made on a home. It’s not inexpensive, yet it is a lot less money than purchasing a property and later finding out information that could have saved potential buyers much time, money and sleepless nights listening to the ghosts in their new house go bump in the dark!

 

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