A stigmatized property is defined by the National Association of Realtors as "a property that has been psychologically impacted by an event which occurred, or was suspected to have occurred, on the property, such event being one that has no physical impact of any kind."

While the Winchester Mystery House, for instance, is kept in excellent physical shape, it could be classified in the stigmatized category due to its reputation for ghostly inhabitants. However, the most common properties associated with stigmatized property are those in which there have been murders, suicides or criminal activity.

What happens if a house is supposed to be haunted or it was the site of a murder or accidental death? Realtors must follow disclosure laws that can vary dramatically from state to state. Since some prospective buyers would be affected by news of a stigma and it could result in their not bidding on a house or reducing an offer, the seller may be unfairly hurt in the process. Balancing the right to know with the ability to sell a property creates gray areas surrounding the disclosure of stigmatized homes.

In the 1980s there were some properties on the market associated with AIDS-related deaths, and questions arose as to whether they should be disclosed under the category of stigmatized property. That's one area of disclosure that has been defined in the past few years, since the 1988 Fair Housing Act Amendments established the handicapped, including people diagnosed with AIDS, as a protected class. Therefore, owners or agents do not need to disclose whether someone was afflicted with or died of AIDS in a particular home.

Under both California and federal law, it is illegal to discriminate on the basis of race, color, religion, sex, handicap, national origin or familial status in the sale or rental of housing, including:

* Refusing to sell or rent after a bona fide offer has been made;

* Discriminating on the terms, conditions or privileges of a sale or lease, or in providing services or facilities;

* Indicating any preference in advertising or statements, oral or written;

* Making false representations about the availability of a dwelling unit; and

* Attempting to persuade owners to sell or rent a dwelling by making representations about the entry into the neighborhood of certain classes of people.

While AIDS is covered under fair housing rules for disclosure, other areas are not so easily defined. Usually property defects are physical, and disclosure is mandatory in most states. If the defect is an emotional stigma, the disclosure becomes dependent on material fact. A material fact is considered to be something that would affect the decision of a reasonable buyer to buy a house or would cause a reasonable person to pay less for the property, knowing about the stigma. In California, it is not required to disclose an occupant's death if it occurred more than three years prior to the date of offer to purchase.

There are other factors to consider in the process. It is important to determine whether the stigma is fact or fiction and to separate rumor from reality. Checking out newspaper accounts or other factual sources may help determine whether the house on the corner was the actual site of a multiple murder or whether it is only a neighborhood rumor.

"Each neighborhood has its own pipeline and grapevine," said John Carman of Coldwell Banker. "It's important, for informational purposes, to understand what happened. Then there is the moral ground, the framework of the time factor and what is required by law. Sometimes consulting legal counsel is necessary to determine whether a disclosure would taint the property or if it is appropriate to disclose."

After all legal requirements are met, it can sometimes be a tough call as to whether to disclose something or not. Some buyers may not view the stigma as an obstacle, while others would view it as a deal breaker. That's why it is important to work with real estate professionals who understand the issues associated with stigmatized property and who know how to evaluate facts and make informed decisions about disclosure.

"Keeping on top of all the newest disclosures and issues that can affect the sale of property is an integral part of the service Realtors provide to clients," said Alicia Tuvell of Alain Pinel Realtors in Los Altos, president of the Silicon Valley Association of Realtors. "As a resource to our members, we offer educational workshops and are a source for disclosure forms and notices. In addition, our members uphold the strict code of ethics and standards of practice set by the National Association of Realtors."

To find a local Realtor member of the association, check out www.silvar.org.