Rumors and Psychologically Affected Property

Do you really need to know everything about a property you are purchasing or renting in Indianapolis? Many tenants don’t think about the issue of a psychologically affected property until they hear a rumor. There is a broad set of circumstances that define these properties, but in many cases, the facts may be different than the rumors.

The Rumor Gets Started

We recently onboarded a new property in Indianapolis. It’s owned by a corporate client who obtained ownership in a bank sale. The owner has never seen the property. Our normal process is to inspect, report back to the owner about the property, and determine what needs to be completed to prepare it for rent.

While our field manager was inspecting the property, somebody walking down the street and stopped him to ask what was going on with the house. Strangely, he asked if we knew what had happened there? Our manager proceeded to hear a rather disturbing story lacking in many facts such as a timeline. Nevertheless, with no history, and neighbors with great stories, how does that affect the owner’s attempts to rent the home?

Does This Rumor Have To Be Shared?

First lets start with the basic fact we really do not know anything. This is somebody who for all we know has the property confused or is reporting a rumor heard at a late night social gathering. Who really knows? The interior tells no tale of any issues, though the walls are painted in the last few years and the carpet replaced- does that really mean anything?

Do we as a property manager have an obligation to research the reputed history of a home? Does the owner who has never lived in the home? Lets start with these questions. Fortunately, in Indiana we do not have a legal obligation to research the validity of this person’s claims. So, in the case of this home we can end our story and leave it that we just need to get the home leased.

Or do you feel we should dig deeper into the accusation so we know if there is some sordid past to the home? If we learn the walker’s story has merit, what do we do then?

What If It Really Is A Psychologically Affected Property, Then What?

What if the owner knows that something happened that involved an event some might consider unsettling? In this case, the property is called a psychologically affected property. This type of property is for sale or rent and one of the following occurred.

  • A resident of the home had or died from an illness related to HIV.
  • Someone died on the property.
  • Criminal gang activity took place on the property.
  • There was a shooting involving law enforcement at the home.
  • Illegal drugs or controlled substances were manufactured on or sold from the residence.
  • A felony with crimes ranging from theft to violence with bodily harm.

It also depends on where the home is located as to the burden of disclosure required when selling or renting. In Indiana the law does not require disclosure of a psychologically affected property. The responsibility is on the prospective buyer or tenant to ask very specific questions. In providing answers the owner or manager may not intentionally misrepresent their knowledge.

Sort of the real estate version of don’t ask, don’t tell, except this one is don’t tell unless asked.

What Is the Best Practice If The Rumors Are Fact?

In practice we have always highly recommended owners disclose the stigmatized history of a home. Buyers and renters will find out from a neighbor or some other way. Plus it will just give a tenant an excuse to complain about everything wrong with the home. If the owner knows about it, disclose it.

There is no burden to find out if the walker knows what they are talking about. So, it is up to the owner if they really care to dig deeper into this rumor.

What do you think? Is there ever a reason an owner should not disclose a psychologically affected property? Does our company as a manager have a responsibility to now research this property further to find out if it has a past that could cause the home to be labeled as stigmatized? There are no right answers, but generally in the case of the unknown, stating a lack of knowledge is probably best.

It is never a great practice to spread rumors.

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WILMOTH Group is headquartered in Indianapolis, Indiana. We focus on providing creative local solutions for a variety of residential real estate needs including, properties for sale, property management services in Central Indiana.