Humber/Ontario Real Estate Course 4 Exam Practice

What could explain Seller Smith's property selling for $30,000 less than similar properties due to a past crime?

1. The reduced price could be attributed to a stigma

2. A stigma affects only crimes occurring within the last few days

3. Appraisers would disregard any crime-related depreciation

4. The reduction is categorized as a detrimental condition, not a stigma

5. The stigma affects only historic properties with similar crimes

6. Losses due to crimes are negligible in market evaluations

The correct answer is: The reduced price could be attributed to a stigma

The correct answer highlights the concept of stigma in real estate, which refers to a reduction in property value due to associated negative perceptions linked to past events, such as crimes. In this scenario, the crime associated with Seller Smith's property creates a psychological barrier for potential buyers, even if the property itself has not been physically harmed. This perception can lead to decreased demand, thus lowering the selling price compared to similar properties that do not carry the same stigma. A stigma can be persistent, affecting properties long after the event has occurred, and is not limited to recent crimes. Potential buyers might avoid the property due to their belief that the location has undesirable qualities, impacting its desirability and market price. Understanding these dynamics is essential for real estate professionals, as they must navigate buyer perceptions and market conditions that can affect property values significantly. The awareness of such stigmas explains why Seller Smith's property sold for less, as the emotional and psychological factors in real estate transactions can influence property pricing more than physical characteristics alone.