There Goes the Neighborhood

Mortgage & Real Estate

WE’RE HEARING about the neighbors. As in who lives in the neighborhood. How can you find out? What can you find out? Suppose you do not like what you find out?

I came across a discussion this week involving real estate attorneys in New York and New Jersey. The issue was about a homebuyer finding out that a sex offender lives in the neighborhood after they closed on a home. My thought process jumped to how does that unpleasant situation factor into the appraised value of the home?

Every state, and sometimes county or town, is going to have different laws about convicted sex offenders and where they can and cannot live. Every state is going to have different laws about what a seller must inform a buyer of in regards to this issue. In many states a seller has no obligation to disclose anything about nonstructural home defects. If Charles Manson lives next door then it is the buyer’s responsibility to figure that out. There is a Latin phrase for this known as caveat emptor which means let the buyer beware.

The discussion I read (yes read) went on to analyze other possible unpleasant things in a neighborhood from a toxic waste dump to a jail to halfway house. Some “defects” are a lot easier to discover than others. One attorney found out that a correctional facility was located around the block from where he lived in New York City and there was an active work-release program going on. The correctional facility was housed in a nondescript building. The attorney found out about this by doing what we all do every day—he did an Internet search.

Many states have different data bases available to the public to look up certain information, especially about convicted sex offenders. Some of these data bases reveal more specific information than others especially as to location. Sometimes it is just by ZIP code or county and not address. There is a delicate public policy issue here about privacy for those who served their sentence and the public’s right to know. Also without being critical of a parent’s legitimate obvious concern one does not need to get hysterical without having all the information.

I moved to Michigan in 2003 and before I signed a contract to buy I checked out a state data base for some type of convicted criminals. I actually came across the data base by sheer accident. There was a story about the data base in the newspaper because the data base was relatively new at the time. I found out that there is a minimum security prison in my ZIP code. I have a big ZIP code geographically speaking. The prison is far away and I could care less.

The legal discussion I read related to an upset buyer wanting to find a way to back out of a home purchase. The questions were about what if anything did the seller know about the issue and whether the seller had to disclose anything. I suppose the buyer could turn around and try to sell the house as a solution but that will cost them a few dollars. Also how do you answer the question of a prospective buyer about why you are selling when you just moved in?

How about the lender? Well I suppose we cannot blame this situation on the lender can we? Maybe with a little litigation we can. After all, the lender is supposed to disclose all about the loan terms to a consumer why not also tell the consumer the neighborhood may have a problem? Maybe lenders already have this information about the location of sex offenders and how this fact would impact the value of a home. Then again maybe lenders do not have this information and they probably don’t want to know since they are sitting on huge foreclosure inventories.

Based in Chelsea, Mich., John McDermott is a real estate and elder care attorney who represents both consumers and businesses. He can be emailed at

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