Psychologically Affected Property Disclosure in Indiana Real Estate

Instructor: Janice Chretien
Do you need to disclose that a crime happened? This lesson will define psychologically affected property and discuss the statutory, regulatory, and disclosures required by home owners and real estate licensees in Indiana.

What You Don't Know May Disturb You

Pete just settled into his recently purchased home and was excited about meeting his new neighbors at the monthly block party. Pete was enjoying a cold beverage with Bob, Steve, and the other Bob who have all resided on the block for over five years.

Steve said to Pete, ''I was so happy to see someone move into the 'murder house.' I was afraid that the story had been covered in the news so much that no one would want to move into that house.''

Stunned and looking confused, Pete inquired about Steve's statement. Bob, Steve, and the other Bob proceeded to share the awful details about the criminal activity, drug dealing, and the police shoot-out that ended in the death of two criminals on the front lawn. Pete could not believe what he was hearing, and he no longer felt proud about the great deal he got on the home.

The next day, Pete called the real estate agent, Sue, who represented him on the purchase. He asked, ''I reviewed property disclosures, how was I not informed of the stigma on the house?''

The real estate agent explained the disclosure requirements of psychologically affected property. Pete responded, ''I wish I would have been aware of this rule before.'' He did not need to say more; the real estate agent knew she had failed him.

Psychologically Affected Property

Psychologically affected property is the term used to describe a home that is for sale, rent, or lease where one of the following occurred, or is reasonably assumed to have 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 under Indiana IC 35 occurred on the property. IC 35 covers 19 articles with crimes ranging from theft to violence with bodily harm.

Disclosure Requirements

The statutory and regulatory requirements regarding psychologically affected property are detailed in Title 32, Article 21, Chapter 6 of the Indiana Code. Section 5 states that the real estate agent and the property owner are not required to disclose any knowledge of an event that would result in what is described as psychologically affected property.

However, if a prospective purchaser or tenant directly asks the property owner or the representing real estate agent if the home is psychologically affected, they must answer truthfully. Failure to answer honestly or to twist the facts to minimize the truth, or to cover up the details is a punishable offense. Misrepresentation is a violation of the Realtor Code of Ethics, Article 2, which carries a fine of up to $15,000.

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