Most U.S. states require sellers to fill out a standard form disclosing what they know about the property's condition and list any potential physical defects. This is a relatively recent reverse of the older “buyer beware” norm in real estate and lets buyers know ahead of time of any major problems with their dream home.

Some states go a step further and require sellers to also disclose “emotional defects” that could impact and stigmatize a property. This includes traumatic events like murders and suicides, reported paranormal activity and even proximity to homeless shelters.

Whether you have to disclose anything and what types of defects you have to disclose all depends on the jurisdiction. If a seller does have to disclose emotional defects, which ones and how much detail they need to go into again varies among locations.

In Massachusetts, for example, the possibility of a property being “psychologically impacted” isn’t considered a “material fact required to be disclosed” to potential buyers. In Virginia, emotional defects like murders and ghost sightings only have to be disclosed if they physically affect the property (Blood running from the walls? Gotta tell the buyer). In California, as American Horror Story demonstrates, sellers do have to disclose emotional defects, but only in a very limited way. The state Civil Code requires that a death on the property only needs to be disclosed if it occurred less than three years prior to the sale and older incidents need to be addressed only if the buyer specifically asks. Some jurisdictions are a little more vague in the way they word things, so smart sellers could potentially disclose what they need to without having to drop words like “haunted,” “poltergeist” or “murder spree.”

http://www.nolo.com/legal-encyclopedia/buying-haun...

A Google or other Internet search may also turn up relevant information. Too bad Jeffrey Stambovsky wasn't able to do a little Web-surfing before he bought a turreted turn-of-the-century Victorian in Nyack, New York in 1990. Being from New York City, Stambovsky wasn't familiar with local legends, and the seller hadn't disclosed to him that the lovely riverfront home came with its own family of Caspers.

Once Stambovsky got wind of all this, he wanted out of the purchase. He took the seller and real estate agent to court, claiming fraudulent misrepresentation. The lower court was not sympathetic and ruled that the seller and agent had no obligation to disclose ghostly presences. But a New York appellate court made the astonishing ruling that the house was haunted:

"Whether the source of the spectral apparitions seen by defendant seller are parapsychic or psychogenic, having reported their presence in both a national publication (Readers' Digest) and the local press (in 1977 and 1982, respectively), defendant is estopped to deny their existence and, as a matter of law, the house is haunted."

Apparently the seller had sold her story to Reader's Digest for $3,000 and made a "verified" claim to the magazine that the house was haunted. As one contract lawyer pointed out, "If the seller now claimed in the litigation that the house wasn't haunted, the seller would have been caught in a $3,000 lie to Reader's Digest."

Stambovsky was allowed to back out of the $650,000 purchase. But don't feel too bad for the sellers. Once word got out that the house was legally haunted, a new group of buyers were attracted to the property, including the well-known mentalist, The Amazing Kreskin.

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