My sister and I shared a house for the last several years, but she died last month and now I need to sell it and move into a senior living center. Her death was a peaceful and natural one, in her bedroom, with family by her side. Nevertheless, a couple of people to whom I've mentioned that I'm selling have said things like, "Oh, you'll have trouble selling after buyers find out someone died there!" or "Better not tell buyers about the death in the home."
My real estate agent seems to think I shouldn't worry about this, but I am worried. Do I legally need to tell buyers about the recent death? Will it drive away buyers?
What you're talking about is the issue of "psychological damage" to a property, to be distinguished from "physical damage." In some cases, the psychological damage is so great—such as after a violent or highly publicized murder or suicide, or widespread reports of haunting—that the house is considered "stigmatized" and therefore less valuable.
In most states, the owner would indeed be expected to disclose a defect causing the house to be stigmatized, so that buyers could adjust their expectations and purchase price accordingly. As a practical matter, this disclosure would likely be made on a seller disclosure form, some version of which is required in most U.S. states.
However, a peaceful death is another matter. Let's not forget that a century or so ago, dying at home was the norm—few people went to hospitals. If every house where someone had died a natural death became stigmatized, there would be a lot fewer saleable houses in the United States. Sure, a few people might be sufficiently put off to look elsewhere, but plenty of buyers see the home for what it is—an empty structure, waiting for them to bring new energy into it.
Which brings us to the question of your legal obligation when filling out the disclosure form that is likely required in your state. You will need to check into your state's law.
If you live in California, for example, you must disclose whether any deaths occurred on the property within the last three years. Few other states' laws contain such a requirement, however. In fact, in some states, sellers are explicitly told (within the law or by court decisions) that they do NOT need to disclose deaths on the property to buyers. This is the case in Arizona, Georgia, and Pennsylvania, for example. If in doubt, consult an attorney.
Of course, if a prospective home buyer asks you outright whether anyone has died in the home, you cannot lie (unless you want to risk being later sued for fraud). Also, be prepared for any buyer who is interested in this issue (or shall we say obsessed by it?) to have already found the information online, at a site like DiedinHouse.com.
Chances are, however, that your real estate agent is correct in saying you do not need to disclose the death, and buyers wouldn't be all that upset if they learned of it anyway.