It's Christmastime and the Gusters have invited Shawn and Henry over for dinner, one of only a handful of such invitations ever extended to the Spencers since Bill and Winnie Guster have always thought of Shawn as a bad influence on their son. After their meal, during which Shawn tries to prove he's actually been a help to Gus over the years, the group goes caroling through the old neighborhood, starting with everyone's most hated neighbor - Old Man Fuller. But when they get up to the house, Shawn knocks on the front door, which swings open to reveal Fuller, hanging from the banister.
Lassiter and Juliet arrive to what looks like a suicide. Shawn notices a wound on Fuller's head and a stain on his shirt. Also, a broken teacup, a gourmet meal, and shows circled for that night in a TV guide. All of which, Shawn believes, point to murder instead of suicide. Plus a man of Fuller's age and condition could never have hoisted himself over the banister. Shawn is determined to solve the case to impress Gus' parents, so he has a "vision" Fuller was a victim of foul play, making the cops take a second look at the evidence, which confirms Shawn's suspicions.
Shawn, Gus and the Gusters arrive at the police station to give their statements. Lassiter tells them that weed killer was found in Fuller's system - weed killer that belongs to Bill. Bill admits to poisoning Fuller's plants in a long-standing dispute over the property line. Lassiter goes on to say that Fuller's head wound was caused by a hammer - a hammer that had Bill's fingerprints on it. Bill says Fuller took the hammer, along with several other tools, and never gave them back. Lastly, Lassiter says the rope used to hang Fuller came from Bill's boat. Bill, unfortunately, has no explanation for that one, and the cops are forced to arrest Gus' dad.
Back in the neighborhood, Shawn notices that Fuller's house is in a shocking state of disrepair, and realizes he probably not only had a feud with Bill, but the homeowner's association as well. He tracks down it's head, Carl Mitchell, who says Fuller was a constant thorn in his side. But he was also a constant supporter of the Mitchell Family, who founded the neighborhood a hundred years ago and are lobbying to have it declared a historical district. Fuller always refused to sell his house, preserving the original architecture of the neighborhood, and the Mitchells were his only friends. Mrs. Mitchell arrives and remembers them from when they were kids, reminding them she paid them $5 to mow the lawn years ago and they never completed the job. So she sets them to work in her yard, telling them to make sure they water the gardenias, which she's had longer than they've been alive. While in the yard, Shawn sees someone moving around in Fuller's house. They once again bail on mowing the Mitchell's yard and run over to catch the intruder, who turns out to be a realtor looking to list the house. She tells them she's been cold calling Fuller for years, trying to get him to sell through her. His house is the only property in the neighborhood with 360 degree unobstructed views and will sell for a fortune. Gus insists they have a new prime suspect. Shawn is hesitant but offers to have the cops look into her background and check the phone records. Lassiter and Juliet show up, having in fact found something suspicious in the phone records. But instead of implicating the realtor, they arrest Winnie instead, who made numerous calls and cash transfers to Fuller.
Back at the police station, Winnie tells Shawn and Gus that years ago she accidentally set Bill's boat on fire but before she could confess, the insurance paid it off. Fuller knew the truth and blackmailed her for insurance fraud. Since Fuller was so old, Winnie figured paying him off would be the cheapest move, erroneously thinking he didn't have many years left. Instead of all this being a setback, Shawn thinks this is the break they need, figuring Mrs. Guster wasn't the only person Fuller was blackmailing.
They go back and search Fuller's house and along with finding evidence that Fuller was going senile, they discover hidden binoculars, a camera and an envelope full of blackmail pictures. One of the photos depicts evidence of an illicit affair, and from a detail around the window of the bedroom, Shawn can tell which house the couple was in when the photo was taken. At the house, they find the man's son, who tells them the picture was from thirty years ago but his father couldn't be responsible for Fuller's death because he's been dead for years. He doesn't know who the woman in the photo is, but he remembers she used to visit at night and smelled of White Linen. They go back to the Gusters' to report their progress on the case and while there Bill gets a flyer in the mail for Fuller's estate sale, commenting that people will be forced to buy back things that were probably theirs to begin with. This gives Shawn an idea of how to solve the case. He calls Lassiter and Juliet to meet them at the estate sale where he figures the culprit will try to buy back the incriminating photos and will still be wearing her signature perfume, White Linen.
At the sale, Gus doesn't sniff any woman wearing that perfume, but when Shawn sees Mrs. Mitchell bid on a collection of "antique photographs," he asks Gus to take another whiff to determine the major component of the fragrance. It's gardenia. Shawn then reveals the truth. Like Winnie, Mrs. Mitchell was being blackmailed, figuring Fuller would die soon with her secret intact. But when Fuller started going senile, she panicked, thinking he would accidentally reveal the truth, bringing ruin to her prominent family. First she tried to poison him, but he spit it out, breaking the teacup and staining his shirt. She then hit him with a hammer, which only dazed him. Finally, she put a rope around his neck, looping it over the banister and tying it to the chair lift. When she sent the lift down, it hoisted Fuller off the ground, strangling him. With the case now solved, Bill and Winnie now admit that Shawn might not be such a bad influence after all.