Settle back next to the fire for some haunting tales of house-selling nightmares …

As an earnest real estate investor plying your trade, how were you to know the real reason for the very discounted price on this property was not problems with structure or cosmetics – but because there was a gruesome murder in the home, one that dominated headlines many years ago?

As Halloween approaches I thought I’d share a rare, if ghoulish, topic … just how do you sell a highly-publicized “murder house”? Or, as the experts delicately phrase it, a “stigmatized property”? Even if there is not a speck, sliver or drop of evidence remaining of the horrific events, history has shown that it is doubtful a property with a sensational tragedy in its past will sell for full market price.

Real estate investors specialize in properties with fixable problems. But how do you figure an ARV for a house almost no one wants to live in because of its well-publicized history? The public tends to have a morbid fascination with seeing the site of a gruesome murder – but rarely wants to live there! Can you overcome the memories of terrifying news reports and photos – even fears of supernatural influences?

Fortunately, “stigmatized properties” are so rare there is a good chance you’ll never deal with one. In fact, you may have one on your hands and never even know, if you are in one of the many states with no requirement to disclose a property’s history of bloodshed and death. But in states with tough disclosure laws not revealing a well-known deathly event could result in an upset homebuyer suing the seller, once the neighbors have given them an earful – it has happened!

Imagine the frustration of the owners who were trying to sell the house where Jeffrey Dahmer lived during his teenage years, having committed his first murder in the basement! That was a little much for even practical-minded bargain-hunting homebuyers. But at long last an artist/musician decided that the beautiful wooded location and the very-discounted price were too good to pass up, and that the home’s memories reflected his own edgy vibe.

There are a few go-to solutions for a real estate investor selling a notorious property:

(1) Drop the price precipitously enough and eventually someone will buy it.

(2) If news-media photos are a problem, change the appearance of the house so it is no longer so recognizable, as a favor to the future owner who will want to discourage the morbidly curious.

(3) In really tough situations, consider removing or re-building the part of the house where the tragedy occurred.

In some cases, such as the Manson Family murder house at 10050 Cielo Drive – a high-end residence designed by noted architect Robert Byrd specifically for the views from the 3-acre property – the cure for live-ability (in 1994) was to change the address, raze the home and start over. The new-build luxury home bears no resemblance to the scene of the terrible murders.

10050 Cielo Drive as it was at the time of the Manson murders.

Video of the same location transformed, with a new address, 10066 Cielo Drive.

One of the longest-running marketing struggles of a home highly stigmatized in the 1970’s by both a bestselling book and a blockbuster horror movie is an upscale, 3,300 square foot, 10-room, riverfront property located near the ocean on Long Island, a two-story 1927 Dutch Colonial – the “Amityville Horror” house. Some people would consider the 1974 murders of the DeFeo family, committed inside the home at the hands of the oldest son, more horrifying than the home’s later Hollywood-fueled reputation as “the most haunted house in America”.

Even though it was over two decades after the first movie release, the couple who bought it in 2001 had storied problems selling it in 2012 (having already tried two years earlier). After making some cosmetic changes and dropping the price from $1.35 million to $955k, the property finally found a new owner.

Over the years since the 1979 movie both the address and the street name have been changed. Various owners have modified the exterior, gradually erasing the look that is only too familiar to lovers of horror movies. Windows were re-done, removing the appearance of “eyes”. The exterior color, roof and trimmings are now lighter and brighter. Today the iconic Gothic ambience is gone, replaced by a more contemporary upscale suburban aspect.

And yet – helped by continuing media stories, the public knows: This is the “Amityville Horror House”.

As it was in the 1970’s.

As it is in 2012– notice the change in the upper windows.

The property view with the docks on the river.

As a real estate investor, are you brave enough to take on a stigmatized property with retail marketing challenges this scary? Can anything be fixed on any property to make it a worthwhile fix & flip? Dim the lights and gaze into your misty crystal ball as you come up with a plan for fixing and flipping a tragic murder house …

Do you know of a “stigmatized property” – a property with a public reputation that discourages retail homebuyers – in your area? What has been done to make it more attractive and live-able?

Request a FREE one-on-one Investor Aptitude Assessment with an experienced, real-world real estate investor.