EDITOR’S note:

If you are a new comer to Shanghai and want to buy an apartment, make sure you talk not just to brokers, but also to your future neighbors to see if your new purchase could be hard to re-sell because of hidden risks.

This article discusses the risk of unwittingly buying a “haunted” house, but there are plenty of other risks you should watch for. Don’t think any house you buy in the city will increase in value.

SHANGHAI’S red-hot real estate market witnessed a double-digit increase in completed transactions last year.

In their headlong rush into the market, many investors had little patience for weighing risks.

Yet risks are myriad. The most apparent one, it appears, is a depreciation of property values should the market go into a tailspin. There are many others though, which tend to be overlooked. And being duped into buying a house where someone has died is probably the last thing to come to mind when many investors do reflect on their risks.

A friend recently approached me with a harrowing tale of her doomed pursuit of homeownership. In the beginning everything went smoothly. She paid the down payment, applied for and secured a mortgage, obtained new deeds and paid the transaction taxes, a final step that concluded the deal.

One day when she was pacing her prospective home, picturing her warm family life there, a neighbor sidled up and said in a hushed voice that her dream home was once the scene of a suicide. Allegedly a lovelorn young tenant took her own life by slitting her wrist.

My friend froze where she stood, as if struck by a lightning bolt. Happy reveries of hearth and home turned into a nightmare. The following month saw her making frantic phone calls to the seller, cursing him for being dishonest and haranguing him to reverse the deal.

After the court was called to intervene, the seller eventually agreed to a full refund. But in spite of her best efforts, some 40,000 yuan (US$6,000) paid in taxes were impossible to recover.

In some Western countries, there are transparency laws requiring property sellers to disclose all information related to a unit for sale, including whether somebody died in it. Buyers can ask for their money back if sellers are found to be lying.

In China, however, there are no such mandatory disclosure mechanisms. But in current legal practice, Chinese laws and courts do support buyers if evidence is produced to show that they are insulated from vital information that would otherwise scupper the deal.

In other words, the court would probably have ruled in her favor should my friend have filed a lawsuit. Her losses are inevitable, though. Skyrocketing home prices mean it will cost her more to buy a similarly-sized house once her legal wrangles are over.

There are solid feng shui grounds for her desperation to backpedal on a done deal. According to Chinese folklore, an abode where the dweller dies of an unnatural cause becomes haunted. It could be murder, suicide or accident; electrocution, a fatal fire or poisoning by a gas leak.

Those whose lives are ended prematurely, so goes the superstition, turn into evil spirits that haunt their former residences, or worse, harm the people who “squat” in their place.

Popular fears of haunted houses are well-reflected by the online horror fictions and urban legends that dramatize how gruesome it is to live in a house shared by apparitions.

Even if nothing paranormal actually happens after a new owner moves into a so-called haunted house, or hires a feng shui master to perform rituals to exorcize the “evil spirits,” the threat of ghosts can still conjure up ominous sentiments that can affect its resale.

These houses are often a hard sell, even if they command an asking price well below market levels. And homes adjacent to supposed “haunted houses” can end up as collateral damage.

As a schoolboy, I used to live on the fifth floor of a 1980s-era six-story walkup building. My everyday trips from and to school required passing the door of a household on the second floor.

This routine took a grim turn after the owner of that household hanged himself one night over rumors of his wife’s infidelity. From then on I would scurry past that house in horror. My fears were at their highest at night, when the staircases were unlit — there was no motion sensor lighting back then — and all I heard were my own racing heartbeats and hurried footsteps echoing in the eerily empty building.

Years later, my mother decided to sell our apartment at an almost fire-sale price, citing her anxieties whenever she approached the fearsome home.

Lianjia’s story

Shrewd attempts have been made by some real estate agencies to archive and publicize information about so-called “haunted houses.” They do so by combing through news reports or public police records on homicides, suicides and fatal mishaps.

Lianjia, a leading property broker, stands out with its proprietary nationwide database of homes investigated and confirmed as “haunted houses.” It also promises to buy back those its staff fail to identify through due diligence.

This special service probably owes its birth to a trial in 2014, in which the broker was sued over withholding information showing a home in Beijing was the scene of a homicide.

A Lianjia manager was quoted as saying that similar houses totaled about 2,000 units in Beijing. No figures were given for Shanghai.

If anything, the possibility of moving into a “haunted house” should at least make people wary of a reckless leap into the real estate market. One cannot be too circumspect in considering a major investment like a house, which costs some people their life savings.

A conversation with would-be neighbors, well-informed janitors or neighborhood committee people is highly advised to glean every possible bit of information about a coveted home and avoid potentially unfortunate circumstances.

Last year my wife and I joined the legion of homebuyers in purchasing a small apartment with floor space of about 50 square meters. It was only after the deal was closed that we realized belatedly the need to probe if the house was “clean;” that is, nobody died in it.

Luckily, our connections in the police squad came back with the reassuring answer we had been hankering for.

Choosing tenants

That episode had a pronounced impact on our subsequent decisions. After putting the apartment up for rent, we screened a batch of candidates and finally chose a couple from northeastern China as tenants.

Their gentle demeanor and easygoing manners put us at ease, but we still searched their faces for any clues about the risks they might pose.

We found none. It turned out that our choice was correct. The couple never caused us any trouble. They paid the rent on time. They became part of our WeChat connections.

Lately, I was wondering if I should raise the rent, since inflation seems to be pushing up the price of everything. I mentioned this possibility to my wife. Content with the status quo, she decided against it, apparently not wanting to risk losing a good, reliable tenant.

As she reasoned, the grim thought of the young woman who committed suicide in her rented flat flashed across my mind, and I found myself quietly nodding in agreement.