Just because the "true story" on which a horror film is based doesn't pass the nonsense test is no reason, in itself, to dismiss the movie. (Consider "The Exorcist.")
What the picture does have going for it is a better cast than you'd expect, and some effective shocks and scenes of shivery dread. The story has been trimmed of the more preposterous elements of the "real" haunting, which took place, if that could actually be said, in a Hartford suburb in the mid-1980s. Now we have out-of-towners Pete and Sara Campbell (Martin Donovan and Virginia Madsen, horror vets both) moving into a spooky old house in order to be close to the hospital where their son Matt (Kyle Gallner) is undergoing cancer therapy. Also on hand, for reasons entirely clear to the writers, perhaps, are Sara's niece, Wendy (Amanda Crew), and Wendy's two cute little kids (Sophi Knight and Ty Wood).
Upon arriving at the house, Matt immediately calls dibs on the basement for his bedroom. We know this to be a knuckleheaded decision even before it's revealed that the house was once a funeral home (thus the embalming slabs and corpse cutlery still cluttering the basement); and if that weren't unsettling enough, we learn that the proprietor also conducted séances down there, with his son acting as a spirit medium and channeling thick gouts of otherworldly ectoplasm out of his mouth (an activity seen in creepy flashbacks — it looks like slo-mo barfing). There are also a lot of vintage dead-people photographs lying around (very "Wisconsin Death Trip"), a nicely grisly interlude of eyelid-severing (very Buñuel) and some blather about a nearby cemetery that's missing a lot of cadavers (very whatever). Also wheeled in, inevitably, is a priest (Elias Koteas, Madsen's costar in "The Prophecy," a much higher-spirited horror film) to explain all this stuff for us.
Any movie set largely in gloomy rooms and corridors is going to be low on illumination; but the murk here becomes oppressive — we long for visual contrast. The lights do go up for some scenes set in the cancer hospital, but this plot strand is talky and it slows the story down — very quickly we want to get back to the maggots, the worms and the charbroiled room wraiths. First-time feature director Peter Cornwell has a flair for claustrophobic horror (the séance scenes have an eerie chill); but he also has an unfortunate penchant for that mustiest of fright-flick cheats, the hair-raising jolt that turns out to be "just a dream." At some point, a jaded genre fan is likely to think, "Wake me when it's over."