Economy

The Wall Street Journal recently reported on home "staging" companies that are taking the process to the next level. They are hiring people to live in high-end homes to give the appearance that the home is being lived in. The idea is that instead of leaving homes vacant for potential viewers, home staging companies will have the home occupied because it will sell better. Sound far-fetched? Maybe.

It's Working for Some

According to Showhomes Management LLC, based in Nashville, revenues have increased by 88% since last year. The company's vice president Thomas Scott believes the reason is because occupied homes, especially those that are well decorated, sell much better than vacant homes. But now, home staging companies have become even more creative - they're allowing people to actually come and live in the home, versus just giving an impression of occupancy. It's the cherry on top for home staging companies that want to create the ultimate picture of luxury and the comfort of home.

The Home Staging Process

So how does the process work? Home staging companies are looking for a certain type of person who can live in an unsold property and furnish the home appropriately. That's because these properties are generally luxury homes that are meant to attract high-income professionals. Candidates who are selected must have the furniture and "personality" to match the high-priced home. They must keep the home spotless between viewing hours, usually from 8 AM to 8 PM, and are encouraged to bake cookies or light scented candles prior to showings. This helps take the illusion of a lived-in home to the extreme. The little details are what matter most. One agent even went as far as removing a decorative Buddha statue to create an air of political and religious neutrality.

The Reality

The truth however, is little more than home staging gone wild. Candidates chosen by home staging companies typically enjoy drastically lower rents and bonuses if the home sells quickly. They are referred to as "resident managers" or "property managers," and direct inquiries about the home to the people they work for. They bring their own insurance and furniture to the property, the latter of which is often times borrowed and sometimes rented.

Potential buyers who are made aware of the staging are generally impressed by it, stating that the atmosphere created by the occupants made them believe the home belonged to a professional who made millions of dollars a year. By showing viewers the potential that the homes have, both sides win. The builders and staging companies are able to sell their home, and resident managers are able to relocate to the next property that needs a little human touch.

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The current housing bubble burst was the perfect combination where almost every industry had a hand in contributing to the meltdown. One such party that had a hand in the situation were home appraisers. Home appraisers went to many a homeowners property, provided banks with escalated home value numbers, the banks loaned money on that amount and then homeowners could not afford to repay the debt and defaults increased. New rules will go into affect to limit this from happening. Many appraisers suggested that they only escalated the figures as they were buckling under the pressure mortgage brokers and lenders.

Real estate appraisers are used for a variety of mortgage business. Appraisals are helpful tools and may be required when first evaluating a home for sale, for refinancing a mortgage and any other situation where a home value would be needed. For a long time consumer advocacy groups have been lobbying against some of the existing home appraisal conditions as they promote a conflict of interest. That thought specifically applies to lenders who either financially control or own in-house appraisers.

In February of 2009, new action was put into place in response to lawsuits filed against Fannie Mae and Freddie Mac. Starting in May of the same year, new rules will be in place separating the relationship between mortgage and appraisal companies. According to the FHFA , "the Home Valuation Code of Conduct applies to lenders that sell single-family mortgage loans to the Enterprises beginning May 1, 2009 and will help assure that borrowers, home buyers and secondary mortgage market investors receive fair and independent property valuations."

As long as the code prohibiting any "employee, director, officer, or agent of the lender, or any other third party acting as joint venture partner, independent contractor, appraisal company, appraisal management company, or partner on behalf of the lender, shall influence or attempt to influence the development, reporting, result, or review of an appraisal through coercion, extortion, collusion, compensation, inducement, intimidation, bribery, or in any other manner" are enforced, great improvements to the industry will be made and felt by all.

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