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How to save your empty home from "mansion squatters"

When visualizing “squatters,” you may imagine down-and-out bums sleeping in condemned buildings on the scruffy outskirts of town.

But in a troubled housing market where large numbers of homes in pricey suburban areas are vacant, the pickings for squatters are far more upscale.

mansion squattersSince the housing market tanked, cases of "mansion squatting" have been popping up in metropolitan areas like Chicago, Los Angeles and Seattle -- to name a few. On Jan. 6, a Newport Beach couple was arrested after allegedly breaking into a vacant Newport Coast home, according to an Orange County District Attorney’s Office media release. The couple even contacted the local gas and electric company and -- claiming to be renting the home – requested that the utilities be turned on. When the owner sent an appraiser to the home in order to sell it, authorities say the couple changed the locks to keep the appraiser out.

Roughly 2.5 percent of American homes -- excluding rental properties -- were vacant in the third quarter last year, including 1.9 million homes that were up for sale, according to the U.S. Census Bureau. That's down from the peak of 2.9 percent in 2008, but still high compared to five years ago and earlier when the vacancy rate was under 2 percent.

Leaving a home vacant increases risk of vandalism by squatters and others. That’s why most insurance companies drop coverage on homes that are unoccupied for more than 30 days. But some will grant a vacancy permit if it’s requested before the 30-day expiration date, according to the Insurance Information institute (III).

But a permit provides less coverage than a standard home insurance policy. Vacancy home insurance is available from some insurers, but it will cost much more than standard home insurance policy, according to III.

How to keep a standard home insurance policy for a vacant home

Showhomes, a home staging company based in Nashville, Tenn., offers one solution. Targeting the high-end housing market, the company provides live-in home managers who take care of the home and keep it up to par for real estate showings. Because the home is occupied, owners can keep their standard homeowner insurance policy.

Here's how it works: The homeowner pays the company a set-up fee, which varies depending on the market (usually somewhere between $750 and $2,000 and it can be paid at closing). The company then finds in-home managers to live inside the home. They pay the company rent to live there, but the cost is only a third of what they'd normally pay to live in a home of that quality. For instance, it may only cost $1,200 a month to live in a $1 million home. The home is staged with a combination of the in-home managers' furniture and the company's own furnishings.

"Our goal is to stage the entire home so it looks great but doesn't look like a staged home," says Thomas Scott, vice president of Showhomes. "It has food in the fridge and clothes in the closet -- well organized -- and looks like a homeowner who loves the home lives there. Having life in the home is really important. Buyers can sense -- even smell -- a vacant home."

Scott says homes staged by the company often sell in four to five months when comparable homes take an additional year to sell.

When Charles Schudson and his wife decided to move to Sedona, Ariz., they first wanted to sell their home in Milwaukee, Wis. It should have been easy because their Wisconsin home was in a high-demand neighborhood where homes typically sold almost instantly.

But that was before the housing market slump. The couple tried to sell the home quietly for a couple of years and then aggressively for several months. Still, they couldn’t find a serious buyer.

"To our surprise we found ourselves in the uncomfortable predicament of possibly moving out of a home and leaving it vacant," he says.

Because they didn't want to rent out their home or leave it vacant due to home insurance issues, they hired Showhomes. Three months later, they found a buyer.

Who is that living in your home?

The typical in-home manager is generally in transition after moving out of his or her own high-end home -- like after a divorce or a short sale. The person provides most of their own furniture. He or she doesn't show the home, but must keep it prime condition for the showing.

Thomas says Showhomes conducts background and credit checks before accepting an in-home manager. In addition to the home owner’s insurance policy, the company also carries substantial liability insurance and a series of specially underwritten property damage insurance policies that feature replacement costs. Thomas says that demand for home staging companies has grown as the housing market has weakened. Thomas says business was up 41 percent in 2010, compared to the previous year.

More from Barbara Marquand here

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