It's hard to get a good price for a home with a bad history
by Neil Jenman
Overseas, they are called ‘Stigma Homes’, where something terrible has happened in the past, usually a murder. Stigma homes – or ‘Murder Homes’ as they seem to be called in Australia – can be hard to sell – as at least one irate home-owner in Melbourne is discovering.
Every time likely buyers punch the address of Judy’s home into a search engine, they discover that, in 2008, a man bludgeoned his wife to death inside the home and then buried her in the back garden until the police dug her up a few weeks later. Such a discovery is enough to turn many buyers off.
Indeed, research shows that nine out of ten buyers have “some concerns” about buying a home where a murder took place. And, of course, the more recent the murder the more reluctant are the buyers to buy. One of the first questions buyers ask about murder homes is: “What happened to the murderer?” If the murder is unsolved, the buyers obviously think that the murderer could come back. No thanks. We are glad you told us but even if you give us a discount, we don’t want to buy this home.
But when Judy bought this home, the selling agent did what many agents do when they know something bad about a home – he kept quiet. And Judy failed to do what many buyers are now doing – she didn’t punch the address of the home into a search engine.
When buying real estate – any type of real estate for any purpose, whether a family home or an investment – the most basic thing all buyers should do is research. And, these days, thanks to the Internet, it’s easy to research a home and discover all sorts of information that can influence a decision to buy or even how much buyers should pay. Many homes now have what’s become known as “a digital footprint” – you can learn their history, everything from how often they’ve been for sale to whether or not a crime took place in the home.
Generally speaking, however, many buyers stop worrying about what happened inside a home if the price is low enough (and if the murderer is safely locked-away). For most buyers, the delight of buying a bargain over-rides their squeamishness with the dark history of a home.
In percentage terms, a typical ‘murder home’ (where a murder occurred within the last decade or so) needs to be offered for sale at ten per cent below its normal value before it becomes possible to find a buyer.
One of the most famous ‘murder homes’ in Australia was the former Gonzales family home in the Sydney suburb of North Ryde. The home made national news in October 2004 when the local LJ Hooker office (owned by Peter Hinton) sold it for $800,000 without disclosing to the buyers, the Lin family, that three members of the Gonzales family had been murdered in the home by another family member, 20-year-old Sef Gonzales. When the distraught Lin family asked the agent, “Why didn’t you tell us there had been a mass murder in the home?”, they claim the agent replied, “You didn’t ask.”
When they tried to cancel the sale, the Lin family was told by everyone – the agent, their lawyer, the Office of Fair Trading – that “nothing could be done”. They had paid their ten per cent deposit of $80,000 and signed the contracts. The deal was done. If they refused to proceed with their purchase, not only would they lose their $80,000 deposit, but if the home was subsequently re-sold below the price they had agreed to pay ($800,000) they would be sued for the difference between $800,000 and the new lower selling price.
After the Lin family sought our help, we managed to generate enough publicity that, eventually, LJ Hooker bowed to public pressure and refunded their $80,000 deposit to the much relieved Lin family. The sellers (relatives of the murder victims) agreed to cancel the contract.
The home was then re-listed for sale with all interested buyers being told of its terrible history. Within a few weeks, it sold for $720,000, exactly ten per cent below the price at which it had sold when the buyers were unaware of the triple murder.
Today, as Judy tries to sell her home in Melbourne, buyers keep searching her address on-line which leads them straight to an article that I once wrote about a murder that had occurred at her home and how the selling agent (John Kontek Real Estate) was not disclosing the murder to prospective buyers. That was in 2008.
The home eventually sold, but last year (2015) it came up for sale again. The owner emailed me and asked me to remove my article because it was causing him to “lose sales”. The owner argued that the murder had happened “seven years ago”.
The very fact that prospective buyers were finding my article and then changing their minds about buying the home meant that the murder was still an important point in their decision to buy (or not buy!) the home. Had I removed the article and had buyers then bought the home they would soon have discovered its history – from the neighbours or any of the area’s locals. The emotional distress to many buyers on discovering that their home was once the scene of a horrendous murder can be devastating. Some people can’t sleep for thinking about “the evil in the home”. A lot of people report having nightmares, while others, like the Lin family (who bought the Gonzales home) couldn’t spend a single night in the home.
Eventually the new owner sold the home. Apparently he found a dodgy agent (one who follows the “legal law” which, in Victoria, does not require agents to disclose any criminal acts that occurred in a home). But this agent was not concerned about another law, one that many agents flout – the “ethical law”.
Ethically, all buyers should be made aware of any material fact associated with a home that would influence either their decision to buy the home or the price they may pay. Or both. When an agent conceals any fact and the agent knows (or should know) that if the buyers were aware of that fact then it would quite likely have a major impact on their decision, the agent has an ethical obligation to disclose that fact to the buyers.
And no, that old excuse that many agents use to justify their unethical behaviour – “We are just acting in the best interests of the sellers” – doesn’t wash with anyone who values honesty in business.
Judy claims she had no idea when she bought the home that it was a ‘murder home’. And, as the former owner did last year, she has been pleading for me to “do the right thing” and remove my article so she can sell her home and “get on with her life”. She makes the same arguments to me that the previous owner made, namely, that the murder now happened eight years ago.
But the timing of a murder is only one consideration, the fact that there ever was a murder is the most important consideration. Some people still wouldn’t buy a home if a murder happened a hundred years ago. A murder is a murder and they just don’t want to buy the home – not at any price. But, as already mentioned, the fact that a murder occurred in a home is not the main reason that the home can’t be sold. The main reason almost any home doesn’t sell is because the sellers’ asking price is too high.
As the English essayist, H.L. Mencken once said, no matter what people might say, “It’s always about the money.”
“Not fair,” says Judy. “Why should I suffer? Your article is turning buyers away from my home. The last three buyers all cancelled the sale when they read your article. Please remove it. After all, the murder happened six years ago. It shouldn’t matter anymore.”
Well, sorry, Judy, but clearly it does matter – to many buyers. If not, those buyers would not be cancelling their purchase when they read my article. By asking me to remove my article, you are asking me to do to other buyers what was done to you last year – conceal the fact that your home is a ‘murder home’. Indeed, if the reports from Victoria are correct, what you are asking me to do will soon be illegal. The Victorian government is reportedly about to make it compulsory to disclose to prospective buyers if there has been a murder at a home.
The hard truth is that Judy is suffering not because of my article but because the agent from whom she bought the home did not disclose to her that she was buying a ‘murder home’.
But many people may argue that Judy’s dilemma today is not so much caused by the dodgy agent – after all, there are lots of dodgy agents – her dilemma is caused because she failed to do what all prudent buyers do these days: research. Yes, when Judy was buying this home last year, if she had done what the buyers are doing this year – researching the home just by doing a search on its address, she would not be in the predicament she’s in today.
As a buyer, failing to do your research can be very costly. In this case, it’s probably going to cost Judy about ten per cent of the normal ‘value’ of her home. That’s more than $60,000 – a lot of money for failing to do your research. Unless she can ‘sucker’ someone else into buying it. So far she has found an agent who seems quite prepared to shut his mouth to earn his commission.
Every home buyer should ask every agent (or home owner) what I call the ‘7-Word-Discovery-Question‘: “Is there anything else I should know?” If you get a no, especially a fast no, then follow up the 7-word question with a 3-word question: “Are you sure?”
And don’t just ask the agents and the owners, remember to go the greatest source of information about any home – the neighbours. Just knock on a few doors next door and across the road from the home you are thinking of buying and tell people in the street what you are thinking of doing. They’ll tell you what you need to know.
Research, it’s worth every cent in money and time when buying a home. And if you find out that there has been a gruesome murder in a home and it doesn’t bother you, remember this: Murder homes bother most buyers, so make sure you go for that 10 per cent discount. If not, you’ll be like Judy – finding it hard to get a good price for a home with a bad history.
Always remember: Research – from getting a pest and building report to discovering the true history of the home – is one of the most important factors in home buying. If you fail to do your research when buying a home, it can hurt you badly when you sell that home. And, unfortunately, until Australia has stronger “disclosure laws” which force sellers to reveal the complete truthabout their homes, there are two words buyers must remember when buying any home – BUYER BEWARE.
Footnote: The ACT is the only place in Australia that has reasonable and fair disclosure laws. You may ask why there is not better consumer protection in all states and territories. The reason is appallingly simple; actually, there are two reasons: First, the majority of people who work in the real estate industry don’t care about the well-being of consumers, they only care about their own well-being; and anything that might cause them to lose a sale – such as the buyers cancelling a sale because they don’t like some fact that has been disclosed – is not something they are going to support.
And second, stronger disclosure laws – such as sellers having to provide a certified correct building report – would lead to lower incomes for those who pocket huge profits when consumers waste money on such items as needless building reports.
In most parts of Australia, if there are multiple buyers interested in a home all those buyers may pay around $500 each for a building report. And the building inspectors – and the agents to whom they often slip hefty kickbacks – think it’s a wonderful racket. Imagine it: As many as ten different buyers interested in the same home and all paying $500 each for an almost identical building report on the same home. That’s a total of $5,000, of which a whopping $4,500 will be wasted as only one buyer can ultimately buy the home, meaning that nine buyers lose $500 each. Which means the building inspectors and their dodgy agent mates are profiting from all those loses.
If the state and territory governments forced all home-sellers to provide a building inspection report and warrant its veracity, the real estate buying public would save millions of dollars that’s wasted each year. But this means, of course, that the building inspectors and many dodgy agents would miss out on potentially tens of thousands of dollars each per month. Of course, with the cost of building reports these days and with some buyers inspecting ten or more homes before finding the one they buy, many buyers “save money” and decide not to get a building report thereby putting themselves at great risk.
It’s a tragedy that what is generally the most important – and should be the happiest – transaction in people’s lives is so fraught with danger.
But here’s a tip for sellers: If you want to attract more serious buyers to your home, don’t spend more on advertising as many agents urge you to do (because agents benefit from real estate advertising far more than the sellers who, between them, waste millions of dollars a year on needless or excessive advertising), spend a few hundred dollars on a building report and warrant to all buyers that it’s accurate.
Not only will this attract more buyers to your home, it will make those buyers appreciative that they are saving money. It will even make some buyers feel kindly towards the sellers which means they will be far more likely to pay a higher price.
Sure some agents will sneer at these words. But facts in life can’t be denied. Oh yes, when we all treat each other better and have genuine consideration for each other’s well-being, we all tend to get a better deal. And end up a lot happier.