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Haunting Conditions: Stambovsky, Psychological Stigma, and Disclosure Law

 by Isaac Peck, Publisher

Jeffrey Stambovsky wanted to purchase a property that would give him a weekend escape from New York City. He signed a contract on a Victorian home in Nyack, charmed by its view of the Hudson River. What he didn’t know—until after the deal—was that the seller, Helen Ackley, had spent years telling people the house was haunted. But she never told Stambovsky.

When Stambovsky found out, he tried to back out. Ackley refused. So Stambovsky sued, asking to rescind the sale, arguing he should have been told about the home’s reputation.

The trial court dismissed the case under caveat emptor, a Latin phrase that translates to “let the buyer beware.” It’s a principle, once a dominant one, in contract and commercial law, placing the responsibility on the buyer to perform due diligence before making a purchase.

But the Appellate Division reversed the trial court on appeal, reasoning that, because Ackley had publicly embraced the home’s haunted image, she couldn’t now deny it, and so she was stuck with responsibility for any psychological consequences the plaintiff could demonstrate.

Stambovsky v. Ackley didn’t confirm the existence of ghosts, but it did summon something more lasting: a recognition that psychological stigma can alter a property’s value. Today, the case is found in real estate law syllabi and ethics seminars, a reminder that what you say about a house can come back to haunt you.

Decided in 1991 by the Appellate Division of the New York Supreme Court, the case is often cited not just for its unusual facts (although those are fun), but for its lasting impact on how courts treat psychological stigma in property transactions. At its core, Stambovsky is not about the paranormal, but about whether, and to what extent, a seller’s public representations can materially affect a property’s value and thus trigger a duty to disclose.

“As a Matter of Law, the House is Haunted”
The story of this unusual case begins in Nyack, New York, a quiet town on the Hudson, fifteen miles north of Manhattan. Helen Ackley owned a Victorian home there, and for years she had publicly claimed that it was haunted. She told stories of poltergeists slamming doors, shaking beds, and leaving gifts for her grandchildren. These tales weren’t confined to neighborhood gossip—Ackley had shared them with local newspapers and Reader’s Digest, and even included them in a walking tour of haunted homes. The house had a reputation, and Ackley had helped build it.

Enter Jeffrey Stambovsky, a New York City investment banker looking for a weekend retreat. He entered into a contract to purchase the home for $650,000, unaware of its ghostly fame. After learning of the house’s haunted reputation from a neighbor—and confirming Ackley’s own published accounts—Stambovsky sought to rescind the contract. He argued that the home’s notoriety materially affected its value and that Ackley should have disclosed this information.

The trial court dismissed Stambovsky’s complaint, citing the doctrine of caveat emptor—let the buyer beware. Under traditional common law, sellers were not obligated to disclose non-physical defects except under a fiduciary relationship, or proof of active concealment. In other words, unless Stambovsky had some kind of financial relationship with Ackley beforehand, or he could prove Ackley actively hid or concealed the house’s alleged infestation of ghosts (in fact, she clearly had done the opposite—talking about the hauntings every chance she got), he assumed all the conditions of the house when he purchased it.

The important part of the decision was the trial court’s rejection of Stambovsky’s argument that the psychological stigma of hauntedness, the reputational risks of carrying such a stigma, required disclosure. Instead, the trial judge held that psychological stigma did not constitute a material defect requiring disclosure. Stambovsky was out of luck.

But Stambovsky appealed, and in a 3–2 decision, the Appellate Division reversed the lower court and allowed Stambovsky to rescind the contract. Writing for the majority, Justice Israel Rubin delivered an opinion that was as witty as it was legally significant. He noted that because Ackley had “deliberately fostered the public belief that her home was possessed,” she was estopped from denying it. Essentially, Ackley couldn’t have it both ways, and Justice Rubin was able to deliver his famous pronouncement that “as a matter of law, the house is haunted.”

The majority opinion reasoned that Ackley had created and publicized the home’s haunted reputation, and that reputation materially affected its value. And because Stambovsky, as an out-of-town buyer, had no reasonable way of discovering this stigma, the court found it inequitable to enforce the contract.

The decision leaves a lot of questions unanswered about the particulars of the case. Nobody ever explained exactly why a reputation Ackley so carefully cultivated was treated by Stambovsky and the courts as a loss in value. There’s also no evidence on record that Ackley ever benefited materially from the haunting rumors. Ackley might not have benefited materially at all; she may have just enjoyed the attention. As often happens with appellate decisions, the impacts went far beyond the original case.

Reputation Matters
Justice Rubin’s opinion also acknowledged the limitations of traditional caveat emptor in modern real estate transactions. He wrote, “The doctrine of caveat emptor requires that a buyer act prudently to assess the fitness and value of his purchase. But in this case, the most meticulous inspection and the most searching inquiry would not reveal the presence of poltergeists.” And so Stambovsky v. Ackley opened the door to broader discussions about what constitutes a “material defect” and when sellers must disclose non-physical conditions.

The case is particularly important for its recognition that reputation matters. A property’s market value can be affected by intangible factors—rumors, history, or public perception—even if those factors have no physical manifestation. In this way, Stambovsky helped expand the legal understanding of what makes a property “defective” in the eyes of a buyer.

It also highlighted the tension between traditional doctrines like caveat emptor and modern consumer protection principles. In many jurisdictions, courts have moved toward requiring greater transparency in real estate transactions, especially when the seller has unique knowledge that the buyer could not reasonably obtain.

Since then, several states have enacted statutes clarifying whether and when psychological stigma must be disclosed. Requirements around the stigma of murders or suicides vary widely by state, as reflected in both statutes and key court decisions. In Pennsylvania, the Supreme Court ruled in Milliken v. Jacono that a murder-suicide is not a material defect requiring disclosure. California courts, in Reed v. King, held that multiple homicides could be material if it affects market value. These cases illustrate a patchwork legal landscape: some states treat psychological stigma as irrelevant, while others recognize its potential impact on buyer perception and property value.

Stambovsky did not create a sweeping new national law or inspire all states to become uniform in their treatment of disclosure. In fact, New York law still does not require sellers to disclose psychological stigma unless asked directly. The state’s Real Property Law § 443-a explicitly states that sellers and agents are not liable for failing to disclose that a property was the site of a homicide, suicide, or other stigmatizing event. But many other states do have such laws, and Stambovsky remains a persuasive authority in discussions of equitable disclosure.

Stambovsky’s rejection of caveat emptor for psychological stigma was also a fitting follow-up to the 1984 California decision Easton v. Strassburger, which Working RE has covered, and which established an affirmative duty for brokers to inspect and disclose physical flaws in homes. Together, the two decisions shifted the narrative from buyer vigilance to seller responsibility.

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Stigma, Disclosure, and the Real Estate Professional Ecosystem
Obviously, the decision and the state laws around disclosure affect the dynamic of real estate transactions. From a marketing perspective, Stambovsky is a cautionary tale. Sellers who embrace a home’s haunted image—whether for fun or publicity—may find themselves bound by that narrative in future transactions. Once a reputation is created, it can’t easily be disclaimed. For buyers, the case underscores the importance of asking the right questions. In jurisdictions where psychological stigma is not considered material, the burden may fall on the buyer to inquire about a property’s history. This is especially true for buyers who may be sensitive to issues like deaths, crimes, or paranormal claims.

But how should home appraisers, home inspectors, and other actors in the real estate ecosystem view these issues? The evolving legal landscape surrounding property disclosure has significant implications for how appraisers and home inspectors approach their work. As disclosure laws strengthen across states, professionals in both fields are increasingly expected to engage with factors that extend beyond the physical structure of a home.

For appraisers, this means grappling with the valuation impact of non-physical stigmas. Market perception, whether tied to a property’s history, reputation, or neighborhood context, can materially influence buyer behavior and, by extension, market value. While we can seldom reduce those elements to any kind of simple metrics or numbers, they’re real. They will certainly be real in the eyes of prospective buyers, and in many cases, the laws of the state.

Experienced appraisers already understand the need to balance objective data with local narratives and buyer psychology. In cases of stigmatized properties—properties where there have been murders, suicides, terrible crimes, or scandals, for example—those kinds of calculations may often be specified in state disclosure laws, but even if the laws don’t cover them, appraisers know they need to cultivate good methods of discernment for them.

Even home inspectors, who obviously are not traditionally responsible for reputational issues, may want to note that in jurisdictions with robust disclosure requirements, they may face pressure to identify issues that fall outside the conventional scope of inspections such as prior environmental hazards, known deaths on the property, even neighborhood rumors.

Stambovsky signaled a broader shift toward transparency and buyer protection in real estate. The expectation is no longer just technical accuracy, but context awareness. Insofar as psychology shapes its marketability, professionals in the market need to take note. As the industry continues to evolve, those who can navigate both the material and immaterial aspects of property will be best positioned to serve clients with clarity, integrity, and foresight.

Psychological stigma—whether the property is associated with murder, suicide, hauntings, or other scandalous or shocking events—poses unique challenges in real estate. Unlike physical defects, stigma affects perception, not structure. But there’s no question that stigma can significantly impact market value and buyer interest. Disclosure laws vary by state, creating legal uncertainty for sellers and agents. Buyers may feel misled, while sellers risk reputational damage or litigation. Appraisers must navigate whether stigma influences comparables or marketability. The result is a fragmented legal landscape where ethics, law, and local norms collide. Addressing stigma requires balancing transparency with privacy and recognizing that value is shaped as much by narrative as by square footage.

In the end, Stambovsky is less about hauntings than about honesty. It challenges both sellers and courts to consider how reputation shapes value, and how fairness demands disclosure when silence would mislead. Today, the case haunts real estate law syllabi and ethics seminars, a spectral reminder that what you say about a house can come back to possess you.

Psychological Stigma Disclosure Laws by State (Selected Examples)

About the Author
Timothy C. Andersen, MAI, MSc, USPAP instructor and CEO of The Appraiser’s Advocate, is the instructor of “How to Raise Appraisal Quality and Minimize Risk” (7 Hours CE). (OREP Members enjoy the course at no cost). Andersen has been in real estate and consulting since 1975 and is an AQB-certified USPAP instructor, USPAP consultant, author, instructor and expert witness. Andersen can be reached at tim@theappraisersadvocate.com.

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