Homes with sordid pasts: Creepy, but great bargains

Murder. Suicide. Homes with dark histories can be difficult to sell and often suffer severe drops in value. Here’s how to learn whether a home has a sketchy past and how to mitigate the stigma if you own one.
By Marilyn Lewis of MSN Real Estate

Chris Butler had a list of “musts” when he went house shopping in 2005 in Summit County, Ohio, near his hometown of Cleveland.

    “I had a pretty strict list,” he says. “I play rock ’n’ roll and I was tired of having the neighbors yell at me.” The house needed to have:

● Plenty of space to accommodate his band mates.

● Distance from neighbors, so he could make music without getting angry phone calls.

● Ground-level living quarters, in case his aging mom needed to move in.

It was a tall order in this part of Ohio, outside Akron, where the style is Ralph Lauren and the real-estate market is replete with two-story colonials, Butler recalls.

Imagine his happiness, then, when his agent showed him a stunning, 2,000-square foot split-level home atop a rocky hill on a two-acre lot deep in the woods near the town of Bath. The house was a stylish, well-built 1950s specimen, with a flat roof, wrap-around deck and expansive windows overlooking Cuyahoga Valley National Park. The price — $269,000 — seemed ridiculously low.

The other shoe dropped when Butler’s real-estate agent called. The seller’s agent had made an important disclosure: The house had been the childhood home of serial murderer Jeffrey Dahmer and it was there — in 1978, while Dahmer was in his late teens — that he had committed his first murder.

Butler, a native of the region, knew that Dahmer had lived somewhere nearby. But the news that a homicide had happened in this house that he’d fallen in love with was a startling disappointment.

“My initial shock was, ‘I can’t do this,’” he says.

Then he looked at it differently: In a way — an offbeat way — the home’s bizarre and outcast persona resonated with his own. “After I got over it, it was like, ‘I can’t not do this.’ It fits my alternative lifestyle, my musician-artist nature,” he told himself.

He also understood a rule of thumb in the real-estate market: Homes that have a stigma are harder to sell. They spend more time on the market and, when they do sell, it’s usually at a discount. Some are never purchased and the owner must destroy them to recoup any of the value from the property.

The sellers of Dahmer’s childhood home were at a disadvantage, Butler sensed, so he offered even less than the low asking price and purchased the house for $245,000.

Owners stuck with loss
The sad truth is that if a property you own is the scene of a murder or infamous death, no one is likely to compensate you for the loss in value.

“Believe it or not,” Bell says, “insurance doesn’t cover this kind of thing. Insurance covers physical damage, but not these kinds of stigma damages.”

Bell’s job, in part, is to help owners of these properties establish the market value and figure out ways to mitigate the impact.

Bell helped the owner of the 9,000-square-foot Heaven’s Gate mansion evaluate his property after 39 cult members committed suicide there in 1997.

The owner had purchased the Rancho Santa Fe, Calif., property in 1994 for $1.37 million. By 1997, he listed it for sale at $1.59 million, and meanwhile was renting it to the Heaven’s Gate group. The home on 3.11 acres had every amenity — including an elevator, tennis court, spa, sauna and swimming pool – as well as privacy and a beautiful view.

After the deaths, the owner kept trying to sell, dropping his price to $1 million, Bell says. But no legitimate offers were made and expenses mounted: The decaying bodies caused $100,000 in damage. Finally, the owner let the home go to foreclosure.

“He lost a lot of money, unfortunately. His equity was gone,” Bell says. A neighbor bought the house and demolished it.

So this kind of stigma typically has two effects: It lowers market value and lengthens the time to sell.

A case in point is the Beverly Hills mansion of the Menendez family, where brothers Erik and Lyle murdered their parents in 1989. The father, Jose Menendez, bought the home — 9,063 square feet with 23 rooms, a tennis court, pool and guest house — the year before he died, for $4 million.

The Menendez mansion became a staple on tours of famous and infamous Los Angeles homes. It spent a year and a half on the market and sold for $3 million — about 35% less than equivalent homes that were selling in six months, Bell says.

Overcoming a stigma
Bell says making changes can help, depending on the cause of the stigma. For example, environmental problems can be fixed or a landslide danger remediated. At murder scenes, remodeling is an option. In the worst cases, such as with the Heaven’s Gate property, demolition is the answer.

Otherwise, the best hope for a stigmatized property is simply time. A fresh murder damages value the most. In such instances, Bell advises clients to rent the property — an easier proposition — and wait for time to pass and memories to fade. The more distant the heinous event in people’s minds, the better the chance that the value will recover.

Back in Ohio, Chris Butler continues to enjoy his “unbelievably cool pad,” along with any ghosts and stigma still clinging to it. Some neighbors still won’t set foot inside. But Butler says he believes the home’s notoriety may be fading.

Check out this great MSN Video: Ghost Stories From a Haunted House