In 1977, the local paper wrote a story about the rumors of ghosts in the house. One of the owners even submitted a story about the ghosts to Reader’s Digest, but no one told the Strambovsky family, who agreed to purchase the home without knowing that the place was haunted.
My name is Jared Clemence, I am a REALTOR, and I am also a law student at Kern County College of Law. I’ve had my own run ins with haunted listings, but today, I had to give a little smile when I stumbled upon the case of Stambovsky v. Ackley, because so many buyers have wondered: What happens if you buy a house that is haunted?
What follows is what occurred in the instance of Stambovsky v. Ackley under the laws of New York. Get out your popcorn. Pull up a comforter. And get ready to read about how the law handles haunted houses.
Haunted by Law
The court does not always take a position on the supernatural. They prefer to leave spirits in the realm of churches and deal with more practical matters. How does a court handle a claim that a house is haunted? Do they send out the Ghostbusters with electromagnetic detection equipment to prove the case?
In this case, the court did not look to whether the house was actually haunted. This is known as “haunted-in-fact.” It was enough for the court to establish that it was “haunted-in-law.”
To establish that it was haunted as a matter of law, the court looked to the fact that the local townspeople have been talking about the haunted house for generations. One story appears in Reader’s Digest about this house in particular. The story also appears in the town paper in 1977. In 1989, the house was even included in a tour and listed in the tour guide as “a riverfront Victorian (with ghost).”
Whether it was haunted as a matter of fact was no longer relevant once all the publications surfaced. At that point, it only mattered that it was considered haunted by enough people that the court would consider the home to be haunted whether it actually was or not: It was haunted as a matter of law.
Justice Rubin writes: “More to the point, however, no divination is required to conclude that it is [the seller’s] promotional efforts in publicizing her close encounters with these spirits which fostered the home’s reputation in the community.” And, “as a matter of law, the house is haunted.”
Did the seller have a duty to disclose?
Unlike California, New York is a state that believes in caveat emptor. In other words, in the state of New York, the general rule is “buyer beware.”
What this means is that the seller usually has no duty to disclose any material facts. If this is the rule, then the seller might not be in any trouble for keeping her ghosts a secret.
But, even in New York, there are times when a seller has a duty to tell the buyer about what the buyer may not already know. For example, if the seller actively tries to hide information or has partially revealed some of the information and then stops sharing, then the courts impose a duty to tell the buyer about what is hidden.
For example, let’s say that the poltergeist regularly spelled “REDRUM” in blood on the walls, and the seller positioned furniture to hide these gory details. If that were the case, then the seller actively tried to hide the haunting, and under New York law, the seller would be responsible for telling the buyer about the thing that she was trying to hide. But the seller did not hide the ghosts, she merely did not mention them.
The idea behind “buyer beware” is that the buyer has a duty to be careful and to inspect his or her purchase closely, but as Justice Rubin notes: “the most meticulous inspection and search would not reveal the presence of poltergeists at the premises or unearth the property’s ghoulish reputation in the community.”
Although the seller did not actively hide the stories she shared, Justice Rubin thought that there was a good reason to allow the buyer to end the purchase contract without loosing the down payment.
Rubin writes: “Where a condition which has been created by the seller materially impairs the value of the contract and is peculiarly within the knowledge of the seller or unlikely to be discovered by a prudent purchaser exercising due care with respect to the subject transaction, nondisclosure constitutes a basis for rescission as a matter of [fairness]. Any other outcome places upon the buyer not merely the obligation to exercise care in his purchase but rather to be omniscient with respect to any fact which may affect the bargain.”
In this case, because the seller published and marketed the stories of ghosts, and because the stories of ghosts had an effect on the value of the property being purchased, the court imposed a duty to disclose on the seller where one had not previously existed.
So, in this case, the seller had a duty to tell the buyer about the ghost stories.
What happened to the house?
After the court case, Stambovsky was given back his deposit, and the house went back on the market. Contrary to what you might think, the real estate agent received many phone calls from potential buyers, but the buyers wanted the house “only if it was haunted-in-fact.” I don’t know how they sought to prove or disprove that to the satisfaction of the buyers, but if you’d like to read the story in full, check out the 9th edition of the book titled “Property” by authors Dukeminier, Krier, Alexander, Schill, and Strahilevitz.
What about buying a haunted house in California?
California is not like New York in this matter. California does not believe in “buyer beware” with real estate purchases, and although all house purchases are “as is,” California requires sellers to disclose “all material facts.”
Understanding what makes a “material fact”
What is a “material fact”? A material fact is a fact that the seller knows which affects the potential value of the home in the buyer’s eyes.
So, to be a “material fact” the fact has to satisfy two elements. First, the fact must effect the buyer’s desire to buy the house at the current price (or at all). Second, the fact must be known to the seller.
For example, let’s imagine a ridiculous situation. Say the living room of the house you are selling was purple in 1982 when you first bought the home. You did not like purple, so you hired a painter and colored it eggshell white. Simple, right? Who would care about this kind of thing? No one would!
Along comes a buyer. He offers you list price on the house, and your buyer wrongfully believes that the color purple causes cancer even though no science can support this belief. Even if the color purple was covered up, the buyer believes that it still has cancerous effects. Now, we have a buyer who has an interest in a fact that no one else cares about.
This mistaken belief effects the buyer’s value of the home. He wants to buy a house, only if no room was ever painted purple. He never tells you, because it doesn’t come to mind. You never ask, because why would you? Who cares?
In this case, the buyer cares, and because the buyer cares, the fact that the living room was purple in 1982 becomes a material fact. It is a material fact because: 1) the fact effects the buyer’s desire to buy the house, and 2) you (the seller) knew about the fact.
The dangerous thing about “material facts” is that the seller cannot read the buyer’s mind. What may seem like a detail that no one cares about might be the very thing that your buyer does care about. If the buyer cares about it, and you know it, then the State of California says that you have a duty to tell the buyer about it.
Tips for California Home Sellers
To be safe, if you are selling a house, be overly cautious and tell the buyer everything that comes to mind. If it pops in your head, even for a moment, then it is possibly something that someone, somewhere, might care about.
If your buyer asks a question, assume that the answer is a material fact. Answer all questions honestly and openly, and if you think of something else in the middle of the contract, it never hurts to say to the buyer, “Hey, I just remembered …” and then give the buyer a chance to back out of the deal.
By continuing with the deal after being notified of a new fact, the buyer accepts the house with that newly exposed detail.
You cannot be in trouble for not knowing the answer to one of these questions. Unless there is a reason that you should have known, you should not make any special efforts to research the answers to the buyer’s questions. Just be honest and share what you do know.
Tips for California Home Buyers
As a buyer, help your sellers out. Ask questions. I have had buyers ask questions about dead bodies. They want to know where the death occurred, how it occurred, and why it occurred. In fact, I received a lot of these questions when we sold 1800 Country Club drive where the previous owner passed away in the den. People wanted to know.
Do not be afraid to ask. Buyers have all sorts of questions, and what is material to you is important. I have had buyers ask about whether or not neighbors own or rent. I have had buyers ask about whether or not the floor was original or replaced. Whatever comes to mind that is important to you, ask about it.
If you ask a question, listen to the answer. Take note of it. Write it down. Document it, and then move forward.
As a buyer, know this, you will never get every answer to every question. Sometimes the seller does not know the answer to the question that you asked, and sometimes, you have to take a leap of faith and buy a home not knowing all the details.
Sometimes, the seller or the agent are actually prohibited from telling you the answer by law. (For example, sellers and agents may not disclose a cause of death if it was AIDS related.) So, you cannot get all answers all the time. Just make the best decision with the information that you do have.
No matter what, stay on the correct side of the law.
My name is Jared Clemence, and I hope you have enjoyed the above stories. If you have a house that you’d like to sell in Bakersfield, I’d love to help you stay on the right side of the law. Call me, and we can list your home together so that you avoid problems and make the sales process easy.