Inside This Article:
- A Rhode Island farmhouse made famous by The Conjuring film is scheduled for public auction on Halloween.
- The property is being advertised as “famous” for paranormal activity.
- Auctioneers, title agents, and property inspectors can face significant liability risks when handling high-profile or complex transactions.
- Professional Liability Insurance, also known as Errors & Omissions Insurance, helps protect professionals against claims of negligence.
The iconic farmhouse featured in the supernatural horror film The Conjuring is scheduled for a public “mortgagee’s foreclosure auction” on Oct. 31, according to reports. The Burrillville, Rhode Island, home, which sits on more than 8 acres of land “has become famous for historical paranormal sightings and activity,” the auctioneer’s website states.
Believed to have been built in 1736, the home was last sold in 2022 for $1.5 million to a company operated by a psychic medium who used the house as a tourist attraction. The owner later faced lawsuits and worker complaints, prompting local officials to revoke her entertainment license, WPRI reported.
The house has already drawn interest from potential purchasers intrigued by its paranormal past — as opposed to the “deal-breaker” its history might be for many homebuyers, said Tyler Hayden, Broker, Professional Liability, Burns & Wilcox, Farmington Hills, Michigan.
“Being an individual who watched way too many horror movies at a young age, the news of a house like that hitting the market always leaves me wondering, ‘Who would possibly consider buying such a property?’” Hayden said.
Selling such a high-profile property could come with a unique set of risks for the real estate professionals involved in the transaction, making Professional Liability Insurance also known as Errors & Omissions (E&O) Insurance, a key protection for title agents, auctioneers, inspectors, and others.
“Whenever a movie becomes popular, fans tend to just flock to find the house where it was filmed,” said Heidi Johnson, Broker, Professional Liability, Burns & Wilcox, Kansas City, Kansas. “Since The Conjuring is a horror movie, the property will likely have that ‘haunted’ reputation. When a house like this goes up for auction, that type of controversial nature could really backfire on the auctioneer.”
Whenever a movie becomes popular, fans tend to just flock to find the house where it was filmed. … When a house like this goes up for auction, that type of controversial nature could really backfire on the auctioneer.
The potential liability of ‘haunted’ houses
While data on sales of so-called “haunted” houses is limited, a 2023 report from Zillow found that just four U.S. states address paranormal activity in real estate disclosure laws. Most states do not require disclosure of paranormal activity, though sellers or agents in some states may be required to answer honestly when asked about any stigma associated with the property.
Real estate professionals involved in listing any high-profile or controversial property “certainly could” face an increased risk of being sued over their professional decisions, Hayden said.
“The increased attention captured by a property like this presents several unique challenges that could increase the likelihood of a Professional Liability claim,” he said. “Often when a famous house is up for grabs, it is part of a high-value transaction with a client base that might be more demanding than the average homebuyer. That, as well as the media attention, increase the likelihood and severity of any potential claims.”
The increased attention captured by a property like this presents several unique challenges that could increase the likelihood of a Professional Liability claim.
Conducting the auction on Halloween could also “add to the risk,” Johnson said. Though it “sounds exciting,” it could leave buyers questioning the home’s value after the holiday. “A buyer might think they overpaid or underpaid due to the connection to the horror film. There could be claims of misleading or overselling the value due to the fact that the movie was filmed there. Buyers can also make claims over emotional distress if someone did not accurately disclose everything about the property and its reputation.”
‘Emotional’ transactions could make litigation more likely
Roughly one-quarter of real estate professionals are sued at some point in their career, NextHome estimates, and auctioneers, inspectors, and others involved in these transactions are also vulnerable to litigation. Homebuyers in Winnipeg, Manitoba, for example, filed a lawsuit in May against a home inspector and previous owner for allegedly misleading them about foundation damage, and a journalist recently filed a $10 million lawsuit against a Florida real estate auction firm for alleged misogyny in the sale of her luxury San Juan townhome.
“Clients really rely heavily on these professionals for their expertise, and they expect them to be accurate and to have done their due diligence,” Johnson said. “It is a very emotional transaction for many buyers. There is also some added stress out there in the real estate and title agent space right now due to mortgage interest rates being so high. Individuals may want someone else to blame for a mistake or an error.”
According to Johnson, common claims against real estate professionals include allegations of misrepresentation, failure to disclose information, and discrimination. E&O Insurance can respond to these claims, providing legal defense and coverage for settlements, fines, and more.
“The most common claim we see is the failure to disclose a material fact,” Hayden said. “If information is withheld or not properly communicated to a potential buyer — such as an increased likelihood of demonic possession — the homebuyer stands on solid ground to pursue litigation against the real estate company.”
How severe the resulting damages could be would depend on the value of the property and how much of a financial hit the buyer undertakes, he said.
The stakes are high for real estate professionals managing these fast-moving, high-profile transactions, Johnson emphasized. “Even one lawsuit could be very damaging to their reputation as a professional service provider because they are held to a higher standard,” she said. “It could potentially put them out of business if they are no longer trusted.”
Insurance as a safety net
Defending against claims can be costly, ranging from a few thousand dollars “to well beyond $100,000 for complex cases,” Hayden said. “Regardless of whether the real estate professional did anything wrong, once involved in a claim, the cost to defend such litigation is inescapable,” he said.
Regardless of whether the real estate professional did anything wrong, once involved in a claim, the cost to defend such litigation is inescapable.
Coverage for defense costs is often considered “the most important part” of Professional Liability Insurance, Johnson said. “Whether or not they have done something wrong, you still have to defend — and that takes time and money,” she said. “What they are really buying with these policies is legal defense, and the peace of mind to have a carrier there on your side when you may have made a mistake.”
Supplementary coverages that may be recommended include enhancements for third-party discrimination, open house events, failure to disclose pollutants, lockbox coverage, and contingent bodily injury and property damage, Hayden added.
While many real estate and title agents are required to carry Professional Liability Insurance, some auctioneers and other professionals go without coverage “unless they have a contract that requires it,” according to Johnson. “They may think they do not need it because they are not going to do anything wrong, but it is a safety net,” she said. “Professional Liability Insurance is an investment in the long-term success of their business and its reputation.”
Professional Liability Insurance is an investment in the long-term success of their business and its reputation.
