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Wireless Sensor Network (WSN) has emerged as a dependable technology to improve the quality of life in smart homes through offering various automated, interactive and comfortable services. Sensors integrated at different places in homes, offices, and even in clothes, equipment, and utilities are used to sense and monitor occupants' positions, movements, vital signs, utility usage, temperature and humidity levels of rooms, etc. Along with sensing and monitoring capabilities, sensors cooperate and communicate with themselves to deliver, share and process sensed information and assist real-time decision-making procedures through triggering appropriate alerts and actions. However, ensuring privacy and providing adequate security in these crucial services provided by WSNs is a major issue in smart home environments. In this paper, we examine the privacy and security challenges of WSNs and survey its practicality for smart home environments. We discuss the unique characteristics that distinguish a smart environment from the rest, elaborate on security and privacy issues and their respective solution measures. A number of challenges and interesting research issues emerging from this study have been reported for further investigation.