Selling a house with history

Every home has a history, but some histories are more chequered than others. Crime scenes, murders, tragic accidents and other grisly happenings don’t just attract media attention; they can also also put a potential buyer off.

So what happens when a property with a past comes up for sale? Should a potential buyer be told about what went on? We asked the experts.

A material fact

Tim McKibbin, CEO of the Real Estate Institute of NSW (REINSW), says the rules around selling a house with a history provoke interesting questions.

“In the US they call it a ‘stigmatised’ property – an event on the property, or near the property, has affected it,” says Tim.

“’A material fact’ is the way we refer to it here, and you find those words in section 52(1) of the Property Stock and Business Agents Act 2002.”

This part of the NSW Act was thrown into the spotlight by the Sef Gonzales case.

In 2004 the Sydney home in which Sef Gonzales murdered his family was sold to some buyers who were unaware of its tragic past. Once they found out about the home’s history, they didn’t want to proceed with the purchase. This prompted a review of the NSW laws surrounding disclosure. The agent had to refund their deposit, and the home was later sold for less than the original price.

The law changed as a result of that review and real estate agents must now disclose any ‘material fact’ before they can sell a property. But what actually constitutes a material fact isn’t always clear.

If walls could talk

After Sydney businessman Michael McGurk was shot dead out the front of his Cremorne home in 2009 the papers followed not only the crime story, but also posted the photos of his home when it came up for sale some time later.

Robert Simeon, Director of Richardson & Wrench Mosman & Neutral Bay, was the agent for the McGurk house, when it was put on the market in May 2011 and says that there was much discussion about whether or not the crime required disclosure.

“An agent is required to disclose a death if it happens within the legal definition of the property,” Robert explains. “In the McGurk case the death happened outside the property, on the road, so there was no declaration required”.

Despite the home’s history Robert says there was no financial penalty in the end. “The home was sold with strong competition and both parties were happy with the outcome”.

And it’s not the only house with a history that Robert has sold on Sydney’s leafy North Shore. In 1991 he assisted with the sale of a Beauty Point home where the Mosman “Granny Killer” was found.

“When the property was eventually listed for sale it was on the market for quite some time.  My recollection is that the home’s value ended being quite heavily discounted although today this would not apply as the property has since undergone significant works,” Robert says. “Nor would there be any obligation to disclose the events that took place over 20 years ago”.

An agent is required to disclose a death if it happens within the legal definition of the property

Cultural sensitivities

Houses with histories come in many forms – it’s not just crime scenes that put buyers off. It could be untenable situations with neighbours, drug dealers’ houses, or having known sex offenders living nearby. As Tim McKibbin points out, elderly people die in their homes all the time. Do agents really need to pass that information on?

“What is a material fact?” asks Tim. The REINSW have been seeking clearer answers from the NSW Government on several issues.

“We live in a culturally diverse country and superstitions are very real to some people. Things that concern one group of people won’t affect another group. We keep asking, but we don’t get an answer because no one knows.”

“It’s very real to the people it affects. I respect that, it’s a material issue to them,” Tim says. “Fair Trading provides some guidance on the issue.”

“If someone told me that a person died in this home it wouldn’t bother me but I know it would bother members of my own family,” Tim says. “I know some people don’t like buying properties where there has been a divorce. Some cultures don’t like particular house numbers, some hotels don’t have certain floors.”

“I respect that people have a lot of different issues and take these things very seriously, which makes it a complex area that, unfortunately, the real estate agent is in the middle of.”

An agent’s responsibility

So what constitutes a traumatic event in a home’s history changes depending on who you speak to and varies in importance over time, opening a can of worms for agents, vendors and buyers alike.

While agents around the country have ethical responsibilities under their codes of conduct, the laws surrounding these issues vary from state to state. As Tim explains:

“All jurisdictions around Australia have legislation governing real estate agents in practice but unfortunately none of them is uniform. They have commonality in cover but they don’t bear any resemblance to each other in structure, that’s a problem,” says Tim.

Tim says the obligation to reveal a home’s history in NSW currently rests with the agent alone. “The tribunal has said the agent needs to disclose it, but the vendor doesn’t. But if they make those disclosures without the authority or consent of the vendor they could be in a difficult position where they are captured under different legislation for not acting in the best interests of the vendor.”

The REINSW has tried to incorporate these obligations on the agent into their agency agreements, which require the vendor to provide the agent with the information and to consent to that information being provided to the purchasers.

While a crime scene can turn a buyer off, there’s also an element of public curiosity

“We need some consistency, clarity, and certainty. If we are truly interested in consumer protection then obligating the vendor along with the agent seems logical, and consistent.”

Tim also suggests that the disclosure could instead be captured in the contract for sale of land, in much the same way a prospective buyer has their conveyancer or lawyer make enquiries about mortgages or easements to ensure the land isn’t encumbered.

“As of April there is going to be an additional document required for swimming pools, to say that the swimming pool is compliant, we think you should also include in a contract for sale of land the material facts attached to the property,” Tim says.

Voyeurs

As much as a crime scene can turn a buyer off, there’s also an element of public curiosity, a strange voyeurism, over these types of properties. In fact realestate.com.au’s sister website Squarefoot.hk in Hong Kong has an entire section of ‘haunted houses’ because they hold such strong cultural fascination (and the prospect of a bargain!)

Read more: The most haunted houses in Australia