STR Nightmare that most investors would probably overlook...

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STR Nightmare that most investors would probably overlook...

Nash Mittelman
Real Estate Agent · Bay Area · Member since 2022 · 25 posts · 19 votes

So, I recently helped a client look for a home. It was a super cool single-family property, yet for some reason, the listing hadn't received any offers on offer day. After a closer look into the disclosures, it turns out that the ADU (permitted, junior ADU) was being rented for supplemental income on Airbnb. Unfortunately, one of the Airbnb guests committed suicide in the ADU, and under CA law, the owner has to disclose the event for at least 5 years.

The property is currently sitting on the market, listed at 1.5 million, and should sell for 1.7 million if there wasn't a death on the property. I'm a little mind blown at the fact that they might get 1.4 million for it (300k under market value) due to a guest/stranger who committed suicide, where the owners now have property that has a stigma around it. Circumstances completely out of the owners' control...

I share this because it's not something you might consider when innocently renting out an Airbnb for some passive income. You really have no control over the guests...

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Collin HaysBusiness Member
Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
2y
Quote from @Monique P.:
Quote from @Collin Hays:

Yeah I’d like to read that statute if someone has a link.  

Found it Collin ... California Civil Code Section 1710.2

 Well, it's required, but it's not:

"No cause of action shall arise against an owner or his or her agent or any agent of a transferee for not disclosing facts pursuant to paragraph."

Probably because whether someone died on the subject property is irrelevant. 160,000 people die every day.  Usually, they die somewhere.

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  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    2y

    California law says that a host must disclose a death to guests? 

    Do you have a link for that statute?  

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    2y
    Quote from @Collin Hays:

    California law says that a host must disclose a death to guests? 

    Do you have a link for that statute?  


     It's not specifically a 'death to a guest', it's any death on the property.

    2Reply
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    2y

    Yeah I’d like to read that statute if someone has a link.  

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  • Monique P.
    Member since 2023 · 88 posts · 62 votes
    2y
    Quote from @Collin Hays:

    Yeah I’d like to read that statute if someone has a link.  

    Found it Collin ... California Civil Code Section 1710.2
    0Reply
  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    2y
    Quote from @Monique P.:
    Quote from @Collin Hays:

    Yeah I’d like to read that statute if someone has a link.  

    Found it Collin ... California Civil Code Section 1710.2

     Well, it's required, but it's not:

    "No cause of action shall arise against an owner or his or her agent or any agent of a transferee for not disclosing facts pursuant to paragraph."

    Probably because whether someone died on the subject property is irrelevant. 160,000 people die every day.  Usually, they die somewhere.

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  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    2y
    Quote from @Collin Hays:
    Quote from @Monique P.:
    Quote from @Collin Hays:

    Yeah I’d like to read that statute if someone has a link.  

    Found it Collin ... California Civil Code Section 1710.2

     Well, it's required, but it's not:

    "No cause of action shall arise against an owner or his or her agent or any agent of a transferee for not disclosing facts pursuant to paragraph."

    Probably because whether someone died on the subject property is irrelevant. 160,000 people die every day.  Usually, they die somewhere.


     I agree but will state what you likely are implying…

    there is no way the death is the reason the property is offered and not sold at $200k below market. 

    Someone dying in my STRs does not make my top 100 concerns related to my STRs.  

    1Reply
  • K S.
    Member since 2021 · 401 posts · 254 votes
    2y

    I just sold my condo in San Diego and the agent was required by law to explain this in the sgining agreemnts somewhere.

    It did not effect the resale and sold right away. Most people don't care.  If this guy is selling for 300k less it's not because of the death. Probably because ADUs are ugly garage conversions or the property is undesirable or overvalued to begin with. 

    3Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    2y
    Quote from @K S.:

    I just sold my condo in San Diego and the agent was required by law to explain this in the sgining agreemnts somewhere.

    It did not effect the resale and sold right away. Most people don't care.  If this guy is selling for 300k less it's not because of the death. Probably because ADUs are ugly garage conversions or the property is undesirable or overvalued to begin with. 


     I agree. if it was in a bad area where someone was murdered thats one thing, death/suicide, typically does not have an impact on the value of a home, definitely would not have a $300,000+ devaulation.

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  • Sarah KensingerPro Member
    Real Estate Consultant · OH · Member since 2023 · 2k+ posts · 1k+ votes
    2y

    I wonder if the value has anything to do with where it's located, over a death. I know people are very hesitant to purchase real estate in CA, instead they seem to purchase here is Ohio.

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  • Nathan GesnerBusiness Member
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    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    2y

    Yeah, if it's truly $300,000 below market, it would sell 100 times over, even if the death were disclosed. There's something else going on here.

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  • Luka Milicevic
    Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes
    2y

    This is not an STR nightmare....this is real estate.

    I had a tenant die of an overdose in a long term rental. These things happen and you don't have control over them.

    300k under market and not selling is not bc of the death. Something else is a factor here.

    1Reply
  • James Hamling
    Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
    2y

    Come on, it's CA.... Wouldn't that now be a "feature"? A "Haunted Rental" listing???? 

    When your googling how to get blood out of hardwood, ok than talk to me about a "tenant nightmare".... 

    1Reply
  • Andrew SteffensBusiness Member
    Tampa, FL · Member since 2022 · 3k+ posts · 3k+ votes
    2y

    I think this is an opportunity not a nightmare.  If there were not 100 other reasons why I would not invest in CA I would love to buy houses 15% under market.  I agree there must be other reasons.

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  • Jon Martin
    Member since 2022 · 1k+ posts · 1k+ votes
    2y

    I think some of you are reading this wrong because it is worded vaguely. It is not required to be disclosed to guests but IIRC it is to buyers. Lots of states have similar laws. 

    Market is so constrained that it would have to be some horror movie type stuff to justify that kind of discount, and even then someone would still take it for 1/3 of that discount (at worst) nowadays

    1Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    2y
    Quote from @Nash Mittelman:

    So, I recently helped a client look for a home. It was a super cool single-family property, yet for some reason, the listing hadn't received any offers on offer day. After a closer look into the disclosures, it turns out that the ADU (permitted, junior ADU) was being rented for supplemental income on Airbnb. Unfortunately, one of the Airbnb guests committed suicide in the ADU, and under CA law, the owner has to disclose the event for at least 5 years.

    The property is currently sitting on the market, listed at 1.5 million, and should sell for 1.7 million if there wasn't a death on the property. I'm a little mind blown at the fact that they might get 1.4 million for it (300k under market value) due to a guest/stranger who committed suicide, where the owners now have property that has a stigma around it. Circumstances completely out of the owners' control...

    I share this because it's not something you might consider when innocently renting out an Airbnb for some passive income. You really have no control over the guests...


     sometimes it's just cultural belief, there's one condo in Hilo that was on the market for a year and the deficiency in that apartment was the owner committing suicide.  Everything else is fine.

    It may affect the sale but not always

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    2y
    Quote from @James Hamling:

    Come on, it's CA.... Wouldn't that now be a "feature"? A "Haunted Rental" listing???? 

    When your googling how to get blood out of hardwood, ok than talk to me about a "tenant nightmare".... 


     I recently was showing a vacant unit and one of the potential tenants said "Have you noticed any paranormal activity here?" When I told her I hadn't, she said she didn't think so because she wasn't feeling anything strange. 

    Aa they say it takes all kinds.

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  • Collin HaysBusiness Member
    Property Manager · Gatlinburg, TN · Member since 2020 · 3k+ posts · 4k+ votes
    2y
    Quote from @JD Martin:
    Quote from @James Hamling:

    Come on, it's CA.... Wouldn't that now be a "feature"? A "Haunted Rental" listing???? 

    When your googling how to get blood out of hardwood, ok than talk to me about a "tenant nightmare".... 


     I recently was showing a vacant unit and one of the potential tenants said "Have you noticed any paranormal activity here?" When I told her I hadn't, she said she didn't think so because she wasn't feeling anything strange. 

    Aa they say it takes all kinds.


    I had a cabin in downtown Gatlinburg once - it burned to the ground in 2017 - that was supposedly haunted.  I'm not a believer in all that stuff but the stories that came out of there were pretty funny. I think it developed some sort of reputation for being "haunted", and folks reserved a stay there for that reason.

    I built a new cabin in its place, and so far, no ghost tales.  ;)

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    2y
    Quote from @Collin Hays:
    Quote from @JD Martin:
    Quote from @James Hamling:

    Come on, it's CA.... Wouldn't that now be a "feature"? A "Haunted Rental" listing???? 

    When your googling how to get blood out of hardwood, ok than talk to me about a "tenant nightmare".... 


     I recently was showing a vacant unit and one of the potential tenants said "Have you noticed any paranormal activity here?" When I told her I hadn't, she said she didn't think so because she wasn't feeling anything strange. 

    Aa they say it takes all kinds.


    I had a cabin in downtown Gatlinburg once - it burned to the ground in 2017 - that was supposedly haunted.  I'm not a believer in all that stuff but the stories that came out of there were pretty funny. I think it developed some sort of reputation for being "haunted", and folks reserved a stay there for that reason.

    I built a new cabin in its place, and so far, no ghost tales.  ;)

    Ha! You should advertise that all existing ghosts, if any, were held over from the previous place.
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  • Craig Jones
    Member since 2023 · 113 posts · 129 votes
    2y

    What is the comp set that's being used to come up with the "market" price?  If the comps have the same sqft and bedroom count, but this property has part of it carved off into a JADU, then for sure it will sell for less than the comps.  Regardless of how nice the JADU is.  The death is just a red herring.

    0Reply
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