Thursday, July 12, 2012

Real Estate Values -v- Registered Sex Offenders: Home Sale Prices Affected by Registrants or Unfounded FEARS?

Does the presence of sex offenders really affect the value of homes?

Reality is, registered sex offenders DO NOT affect home values whatsoever. Peoples' fears do! So, how does FEAR get into the sale of homes?
Suppose I were a real estate salesperson showing you a home, and said, there is a toxic waste site near here. Would you buy the home? The majority of folks would say "NO, not on your life." But, suppose I then told you, I meant the sewer that connects to the home. Right, your answer would change in a second.
Its all about perceived risks, fact versus fiction. Acceptable risks versus perceived risks!

Supposedly there are studies which prove, that the presence of registered sex offenders in a neighborhood, will reduce the value of the homes in that neighborhood. However, are those studies based on fact or fiction, we are about to reveal the loophole in known research (listed below).

Do sex offender registries display anything, that TODAY, proves a registrant is a person who must be feared? Or has the public been led -by Politicians and the Media- to believe ALL registrants should be FEARED? Never forget, today registries are bloated with folks that simply do not belong there. i.e., folks urinating in public, kids experimenting, Romeo & Juliet type cases and more.

Also, it is now well known that when lawmakers want to get a law passed, they couch it with fears about what life is like without the law. Every single sex offender law has been passed using, FEAR! "Perception, not crime, drives down property values," says a real estate salesperson (See source below).

"While sellers tend to sell their properties at substantially lower values when a registered sex offender lives nearby, they may not be lowering their sales price enough. Sellers and their agents may have difficulty estimating a property’s expected value if a sex offender is near. ..." Source below.
What? Manipulating prices BEFORE the sale, then the study is done AFTER the sale, and claims the sex offender caused the reduction! The sex offender did not reduce the price, the real estate person influenced the seller.
Are "FEARS" now being INTRODUCED into home sales, by law and the real estate industry to further their goals? Lets take a look! State laws; Smart Phone Apps; News Articles; Major Research Papers are all in "Supporting Research" below.

The answer is, yes, the real estate industry and law, are the ones inserting Unfounded FEARS into the sales of certain homes. Review the research below, draw your own conclusion, we feel you will agree, the claims that sex offenders caused the reduced values are FALSE! PS: Ask assessor's offices if they reduce values because of registered sex offenders, you will get a surprise! NO!

For now, have a great day and a better tomorrow.
Sex Offender Research, All Rights Reserved! © 2011

* * * Supporting Research * * *

State Laws Requiring Disclosure of Sex Offenders: Some states have laws requiring disclosure of sex offenders before the sale of a home. Does that legal requirement cause hysteria, affecting the minds of the buyers? Accordingly, the law itself may be affecting the sale of homes by implying there is something negative about the home, simply because of a registrant in some proximity to the home for sale.

Example: California Law: Department of Real Estate :
M. Data Base – Locations of Registered Sex Offenders:

Written leases or rental agreements for residential real property and contracts (including real property sales contracts as defined in Civil Code Section 2985) for the sale of residential real property of 1 to 4 dwelling units must contain, in not less than eight-point type, a notice as specified in paragraph (1), (2), or (3):

(1) A contract entered into by the parties on or after July 1, 1999, and before September 1, 2005, shall contain the following notice:

Notice: The California Department of Justice, sheriff’s departments, police departments serving jurisdictions of 200,000 or more, and many other local law enforcement authorities maintain for public access a database of the locations of persons required to register pursuant to paragraph (1) of subdivision (a) of Section 290.4 of the Penal Code. The database is updated on a quarterly basis and is a source of information about the presence of these individuals in any neighborhood. The Department of Justice also maintains a Sex Offender Identification Line through which inquiries about individuals may be made. This is a “900” telephone service. Callers must have specific information about individuals they are checking. Information regarding neighborhoods is not available through the “900” telephone service.

(2) A contract entered into by the parties on or after September 1, 2005, and before April 1, 2006, shall contain either the notice specified in paragraph (1) or the notice specified in paragraph (3).

(3) A contract entered into by the parties on or after April 1, 2006, shall contain the following notice:

Notice: Pursuant to Section 290.46 of the Penal Code, information about specified registered sex offenders is made available to the public via an Internet Web site maintained by the Department of Justice at Depending on an offender’s criminal history, this information will include either the address at which the offender resides or the community of residence and ZIP Code in which he or she resides.

See also this article from The California Association of Realtors.

State Laws Exempting Disclosure: A recent National Association of Realtors survey revealed that only 16 states have exempted real estate licensees from sex offender related disclosure responsibilities: Arizona, Georgia, Idaho, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, and Wyoming. See "Megan's Law: New Risks for Real Estate Licenses?"

Realtors Use Smart Phone Apps: It has also been reported that some real estate sales folks actually use iPhone Apps -BEFORE A SALE- to show folks involved in a sale, where local sex offenders live. And it must be noted that those iPhone Apps are frequently out of date, incomplete and the data mined from illegal entry into state registries. The vendors of these apps even admit they are using a "Private Database" which they have created sometime in the past, and may not be updated as frequently as state registries.
"Lacy Williams, a Realtor with Joyner Fine Properties in Richmond, said she has an application on her smartphone that allows her to show the list of offenders to prospective clients." Sex offenders as neighbors a realty factor Virginia 8-11-2010

Real Estate Agent Quote In News Article: "Perception, not crime, drives down property values!"
The Wagners have lived in their same home for 26 years and they’re raising their daughter, a freshman in high school, in the neighborhood. “We’re raising our daughter here and if we felt it was unsafe, we wouldn't be here,” Deb said.

But Deb Wagner is also a real estate agent and does most of her business in North Minneapolis. When potential buyers get their hands on a real estate contract, they are notified that they should check the area for sex offenders on the DOC Web site.

It’s mentioned several times in real estate contracts” she said. “For people to disregard that, it takes somebody pretty unusual. Unless they’re not super paranoid about that, but who isn't when you mention sex offenders? Especially if you’re planning to move into a community with your children.”

The recidivism rate for sex offenders is 12 percent, which is lower than for other criminals, according to Minnesota Department of Corrections 2007 study. “It creates a perception that this is not a safe place to live,” Wagner said. (Finding new homes for sex offenders 2-28-2011)

Research Studies Claim: The presence of local sex offenders makes the value of the home less. All of this research has been using data AFTER the sale, and after the sale price has been manipulated. They are assuming the reason is, because of the presence of sex offenders to the home sold. No research has investigated "TACTICS" used in selling the home.

Certainly it is easy to scare a seller into reducing a selling price, saying the sex offender over there is the cause, but in reality, the home is still assessed a certain amount by the assessor's office and they do not change assessments because a sex offender moves close to a home. Fear is being used as a tool, fear is "undue influence" and that is well known in real estate law! Lets review the main studies being quoted:
Study-1: "Estimating the Effect of Crime Risk on Property Values and Time on Market: Evidence from Megan’s Law in Virginia" (Brastow 2010)claims that homes have a lesser value because of local sex offenders. However, buried with that study is this comment:
"From the Study" p-9: "While sellers tend to sell their properties at substantially lower values when a registered sex offender lives nearby, they may not be lowering their sales price enough. Sellers and their agents may have difficulty estimating a property’s expected value if a sex offender is near. That is, a reduced offer price may not attract enough potential buyers, resulting in a longer marketing duration of the home. Table 4 shows that homes located near (within .1 mile of) a registered sex offender spend abut 10% more time on the market. This works out to be about 13 days longer on the market than other similar properties, which are also competitively priced. In relative terms, this is roughly equivalent to selling your home in the “off” season of fall or winter (as compared to the summer or spring)."

That portion of the study shows, "Sellers and their Agents" are influencing the sale price of the home BEFORE placing it on the market. Method: FEAR! Why are real estate agents even suggesting lowering the sale price?

Study-2: "There Goes the Neighborhood? Estimates of the Impact of Crime Risk on Property Values From Megan’s Laws" (Linden 2006) This study uses the "Fear of Crime" but never shows that there is any rise in crime when sex offenders move in, or where they lived before. Fear is its focus.

From the study: In response to the fear of crime, residents generally have two options: they can vote for anti-crime policies, or they can vote with their feet. i.e., move..... In this paper, we combine data from the housing market with data from sex offender registrations to estimate individuals’ valuation of living in close proximity to a convicted sex offender. By exploiting both the timing of move-in and the exact locations of sex offenders, we can improve on past estimates of individuals’ responses. The exact location of these offenders then allows us to exploit variation in the threat of crime within small homogeneous groupings of homes. The timing of a sex offender’s arrival allows us to confirm the absence substantive pre-existing differences in property values and to control for the remaining minor differences. Our study is the first to exploit both inter-temporal and cross-sectional variance in the presence of an offender, but not the first to exploit the cross-sectional variation alone. Larsen et al. (2003) examine the cross sectional relationship between property values and proximity to sex offenders using a single year of data from Montgomery County, Ohio. They find a reduction in housing prices of 17% within a tenth of a mile of an offender’s home, and find significant changes in price up to a third of a mile. Although their study is similar to ours in the empirical question it addresses, their empirical strategy suffers from the same potential biases mentioned above.

Throughout this study they talk of the "threat of crime" and use studies of areas where there was crime, but never do they show any crime where the targeted sex offenders lived.

Again we see "fear" being used, and who placed the fear in front of the sellers to induce them to lower their sale price? I doubt very much anyone selling a home, would on their own, say, "Oh, there are sex offenders in the neighborhood, so I'll lower the selling price." This is not the seller's mind, it is being placed before them by someone BEFORE the sale.

Study-3: "Estimates of the Impact of Crime Risk on Property Values from Megan’s Laws" (Linden 2008) Here again, "Fear of Crime" is the focus, but here they introduce "Property Crimes" and localize the fear. Like the earlier study, they never show that any of the crime was found before or after the sex offenders moved in, which might by itself cause someone to lower their selling price.

From the Study: Crime is predominantly a local issue. The majority of both violent and nonviolent offenses takes place less than one mile from victims’ homes, and most government expenditures on police protection are local ..... Understanding the relationship between property values and local crime risk is useful for measuring the willingness of individuals to pay to reduce their exposure to crime risk. This, in turn, can help determine the appropriate level of public expenditures that reduce crime, such as police services. A number of papers have documented an inverse relationship between property values and local crime rates. In one of the earliest studies, Richard Thaler (1978) finds a negative relation between property crimes per capita and property values. His estimates imply that a one standard-deviation increase in the incidence of property crime reduces home values by about 3 percent. A more recent study by Steve Gibbons (2004) finds a decrease in property values of 10 percent for a one-standard-deviation increase in property crime. Over time, crime rates may change as the composition and characteristics of neighborhoods change. Reductions in crime levels may correspond to other changes that increase the value of property located in a particular neighborhood.

Here their focus is on "local crime rates" but they do not show that any crime rate increases or decreases because of the presence of local sex offenders. The study creates the perception that there is a local crime rate when there is none mentioned with respect to the area where the sex offenders lived.

Sex Offender Research, All Rights Reserved! © 2011

* * Research Papers on this Topic * *

"Estimating the Effect of Crime Risk on Property Values and Time on Market: Evidence from Megan’s Law in Virginia" (Brastow 2010)

Fear of Crime and Housing Prices: Household Reactions to Sex Offender Registries (Pope 2008)

"Estimates of the Impact of Crime Risk on Property Values from Megan’s Laws" (Linden 2008)

"There Goes the Neighborhood? Estimates of the Impact of Crime Risk on Property Values From Megan’s Laws" (Linden 2006)

The effect of proximity to a registered sex offender's residence on single-family house selling price.(features) (Larsen 2003)

"The Impact of Megan’s Law on Real Estate Values" (Bell 1998)


Sex Offender Research, All Rights Reserved! © 2011