Are ghosts material? Talking about real estate we pretty much always have a requirement, as real estate agents, brokers, sellers, to disclose all known material defects on a property and pretty much disclose any material facts about the property. But that sort of brings up the question, what is a material fact?

And a lot of that’s easy to define, like the physical structure of the home. If the roof’s leaking, if there’s a foundational problem, you know, easy stuff. Those are all physical things. If there’s a problem with it so it’s not functional to live in the home and be safe, that’s a material defect. That’s easy. It’s a material fact. It’s a defect. It needs to be disclosed.

But it gets a little sketchier when we have some other situations. Like, what if there’s noisy neighbors? What if the neighbor has filed lawsuits against the owner? What if there’s construction, a new freeway going in nearby? What if there’s a drug house nearby? What if the home itself is purported to be haunted with ghosts?

So, are any of these material facts? That’s the question.

The Definition of “Material Facts”

So, the Utah Supreme Court did make a decision. In one particular case they said to be material the information must be important. Importance, in turn, can be gauged by the degree to which the information could be expected to influence the judgment of a person buying property or assenting to a particular purchase price.

Okay. That definition seems to leave a lot to be desired. It says if it’s important to the person, if it would influence their judgment to buy the property. And if we take that at face value, then yes, noisy neighbors could be an influence. Or if there was a ghost in the past or we think there is now, that could be an influence on a potential buyer, depending on how they feel about it.

What Doesn’t Need to be Disclosed

There are some things, like if there was a crime in a home or if someone was killed in the home. Those things, though, are a little bit different. Those are called out in the stigma law. And stigma law says, here’s certain things that you do not have to disclose. This law says these are things that do not have to be disclosed.

So, for example, in Utah, the stigma law says the crimes, the felonies, that kind of thing. It also says a drug house, like if it was contaminated with meth, if after that it was cleaned up to the health level, the determination of how clean, the smallest particles still left in the home, if it’s cleaned to the health department standard, then that’s a stigma. You don’t have to disclose that it previously had contamination.

And another one is if there’s an infectious disease that we know doesn’t affect people who are living there, such as HIV, those are all stigmas. And the law says you do not have to disclose those things. Now, on the other hand, you still have to respond with honesty. You still can’t tell somebody a lie.

So, if you knew that the home had a contamination with a drug like meth, you don’t have to disclose because it’s been cleaned. But if someone asks you about it directly, then you would need to be honest, but you still don’t necessarily need to disclose. And so, you can use your language to decide if you want to dodge that question or not.

Now, it frequently is said that the neighbors will tell them anyway, so you might as well tell them upfront, right? But that all comes down to the law, which says you don’t need to disclose. You still need to be honest and say you need to figure out how to navigate that and talk to your seller about that. But this idea of something that is near the property, but it’s not on the property, is that a material fact?

Interpretation of the Supreme Court Decision

So, in one example, let’s say the neighbors are noisy, and that’s the reason why the seller wants to move. Okay, that’s not a huge deal. But what if the neighbors are more disruptive? There was a case where the neighbors had made repeated calls to the police and had been harassing the property owner, and so the property owner wanted to move.

They even had restraining orders. The police even showed up several times to break up disputes. So, is this type of neighbor a material fact for the new home? It’s not a fact, it’s not a physical characteristic of the home or the land.

But if we look at the Utah Supreme Court decision of is it material to the property, is it expected to influence the judgment of a person buying the home? Well, that’s so broad. Like say, for example: What if somebody never wanted to live somewhere where a baby had been conceived? Is that a material fact now? Does the seller have to disclose if that’s happened on the property?

What if someone just doesn’t like anybody who bled on the floor or something in the home? Has that ever happened in the home? Is that a material fact now? Because that particular person has this strong feeling? The Supreme Court decision sort of leaves that wide open. It says anything that would be expected to influence their judgment. Maybe that’s the key there, “Expected” to influence. So, does that make it a legal standard or a cultural standard?

How do we define that? It’s kind of broad. So I think that’s a little hard and that’s wanting in how we decide what is material. And what’s not material.

“Material,” as in Physical Characteristics

So in real estate school, when they’re teaching real estate licensees and real estate brokers, when people are taking the real estate license course, here in Utah we teach that material facts are the physical characteristics of the home. If there’s a defect there, it must be disclosed.

But we don’t have clear guidance on things like the neighbors, like new construction that maybe hasn’t started yet, but it’s been approved by the city. Do you have to proactively disclose that? it’s not on this property, but it is nearby, how much does that affect it? And the question of ghosts, if there is a haunting in the home, does that need to be disclosed? Is that a material fact? Are ghosts material?

There’s a property near my home in Bountiful which was purported to be haunted, and they were even doing ghost investigations, they put up signs and they nicknamed it after the Ted Bundy house, which is inaccurate, but they pulled that name and tried to market it that way.

If it’s a known thing, if it’s been marketed that way, then that sort of becomes part of the public consciousness. And now that might be a material fact that it was marketed as a haunted house. But whether it’s haunted or not I guess really depends on what you can prove materially.

So, when it comes to disclosure, stick to the things that can be proven, reproduced. And if it’s not on the property, well, consult your attorney, and learn from really great real estate license instructors. Okay, see you out there.