Is a Model Home Considered Occupied?

Is a Model Home Considered Occupied or Vacant?

Two days later the underwriter emails you ordering you to change “vacant” to “occupied” since there is clearly furniture in the house…

Here’s a situation you’ll run into once or twice in your career. There is a new subdivision. Now, new subdivisions sometimes have model homes. Model homes typically have furniture, fixtures, and equipment – usually upgraded. The subdivision has completed its sales program and the developer is now selling the model(s). Your job is to appraise one of the models, since the developer has it under contract to a retail buyer. You do your inspection thing, take pictures of the interior, conclude your value, then send the report off to the client. One thing though; you marked the property as vacant – since, as a model home, it is vacant. Nobody lives there. There are no tenants. It may have been used as the venue for greet-and-grins with local brokers, but it’s a vacant house.

Two days later the underwriter emails you ordering you to change “vacant” to “occupied” since there is clearly furniture in the house, thus someone is living there (notwithstanding you included a photo of the toilet bolted shut so nobody can use it). Since somebody is living there, it is “occupied”.

After thinking silently to yourself that this request merely cements your conclusion that most underwriters are drooling cretins, you patiently explain this was a model home, thus was furnished, etc. as part of the developer’s marketing program. The underwriter, whose first language is clearly not English, pretends not to understand and repeats the demand you change “vacant” to “occupied” because of the furniture in the house.

So, what do you do?

You stand your ground, that’s what you do! With as much patience and diplomacy as you can muster, you email back the house is not occupied. Yes, there is furniture there since it was a model home. Yes, it has upgraded everything – but this is because it was a model home. Yes, this house is spotlessly clean, totally organized, and without the first signs of habitation since it was a model home. Yes, the toilets are bolted shut since this was a model home. But, it is vacant since there are no tenants. There are no owner tenants. It is vacant. There are no lessee tenants. It is vacant.

The key here is to stand your ground. Just because the 1004 form does not lend itself to out-of-the-box thinking does not mean your thinking must always be in-the-box. Just because the underwriter has a rigid checkbox does not mean you are subject to those limitations. If the underwriter does not like your appraisal, then let the underwriter appraise the property. Oh, but the underwriter can’t. The underwriter is not an appraiser! So, really, you are in charge. It is time to act like it!

So, do you give it a C1 or a C2; that is a question for another day, my friends.

For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode 360.

Dustin Harris
Latest posts by Dustin Harris (see all)
Dustin Harris

Dustin Harris

A multi-business owner and residential real estate appraiser. He has been appraising for nearly two decades. He is the owner and President of Appraisal Precision and Consulting Group, Inc. He owns and operates The Appraiser Coach where he personally advises and mentors other appraisers. His principles and methodologies are also taught in an online, Mastermind group. He and his wife reside in Idaho with their four children. Dustin Harris on

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28 Responses

  1. Abby Piper Higgins on Facebook Abby Piper Higgins on Facebook says:

    It doesn’t even have to be a model home. It can be a vacant home that has been staged. Furniture does not equal occupied.

    • Avatar Jonathan A Hale says:

      I was told by the MAI who trained me that furniture DOES equal occupied. If someone runs to the grocery store there home doesn’t automatically become vacant. When someone goes on vacation the home is not all other sudden vacant. It is not vacant until the owner moves out WITH his belongings.

      • Jonathan you may want to recheck and see if one of you misunderstood the question. MANY model homes are staged with furniture for illustrative purposes. They are not occupied (unless the sales office itself is located in one in which case an argument can be made).

  2. Jill Pozniak on Facebook Jill Pozniak on Facebook says:

    Super simple! Anytime a vacant home is not empty.. just add a statement that although there are furnishings or personal items present the subject is not currently occupied..

  3. Lisa Calise on Facebook Lisa Calise on Facebook says:

    But on another note, if it’s a model home that is used by the builders sale’s reps where they conduct business it does experience age related depreciation in my opinion.

    • Chuck Minzenberger on Facebook Chuck Minzenberger on Facebook says:

      you bring up a good point that does come up, even a new construction home that’s been sitting for a few years, never occupied, a C2 would be reasonable

    • Depreciation is a loss of value. Many if not most model homes actually go up in price during the course of their exposure. I used to be a tract sales manager in Las Vegas. Our models ALL sold higher than original premiums. You are right in theory. Doubtful though in actual practice.

      • Avatar Pierce Blitch III says:

        Mike, you can have physical depreciation and still have appreciation over time dictated by the market. If the appreciation is greater than the physical depreciation, yes, values can be higher over the long run. As always, as I like to tell real estate agents, it depends………

    • Avatar don says:

      Staged houses can and do frequently miss-portray the actual efficiency of the size. This should be mentioned in the body of the report. “BUT” so can a well decorated owner occupied home. Not all of home owner’s are perfect, maybe appraisers are?
      The relocation industry did a study of owner occupied homes v vacant and concluded buyers paid more for the owner occupied homes??? They supposedly considered the extra pressures on the sellers and lenders holding vacant properties.

  4. Chuck Minzenberger on Facebook Chuck Minzenberger on Facebook says:

    vacant, realtors often stage homes, especially in higher end markets, a piece of furniture is not a person [although a Corporation is a person . . . never quit understood this one]

  5. Avatar Bill Johnson says:

    Let the UAD form be your guide people. As in C1 in part states “Recently constructed improvements that have not been previously occupied are not considered “new” if they have any significant physical depreciation (i.e., newly constructed dwellings that have been vacant for an extended period of time without adequate maintenance or upkeep).

    Define the reality (has been maintained), quote line by line if need be for a C1 rating, and move on.

    If our assignments in part are to be scored by way of known to all condition ratings and definitions (UAD reports), then develop support for your ratings by using the same terms we are scored against.

    It’s not that hard Dustin.

    Seek the truth as often times the answers are right in front of you.

    • Bill UAD ONLY applies to FNMA and GSEs. Its not a valid source for appraisal principles. On the contrary-its largely an artificial construct fo the convenience of scraping data. UAD guidelines do not define the ownership interest in real estate that exists. Occupancy (status) is an indicator of rights that MAY reasonably be expected to exist.
      Vacant or owner occupied= fee. Tenant occupied = leased fee.

      • Avatar Bill Johnson says:

        Mike, when appraisers are giving out Q and C ratings and justifying why they are doing so (providing support for), the UAD definitions that are required to be in the report (for all to read) can serve as a backdrop for ones reasoning and thinking (not principles). Why would a like definition C3 condition comp warrant a downward adjustment but be of the same rating? Is it because a C2 rating in part says “similar in condition to new construction”, and although superior on its own (to the subject) it is not like new construction so thus a C2 rating could not be supported?

        Right or wrong, but if appraisers are getting flagged by FNMA / GSE’s, and or underwriters are using the UAD definitions in error (they get reports / same ratings but adjusted), encompassing the same UAD verbiage as part of your support goes a long way in getting your reports past those untrained eyes that often view our work. For me, I apply the principles but in part use the definitions to support my opinion.

        Seek the truth.

        • Seriously?

          Read the original FNMA directions on UAD. It is EXPECTED that same ratings MAY still result in one being superior or inferior to another rating that is the same ‘C’ or ‘Q’ rating.

          The entire concept of UAD ratings is one of the most asinine requirements ever to drop out of FNMA. Condition and quality are not absolutes as assumed and claimed by FNMA. They are in fact relative comparisons out in the marketplace contrary to FNMA’s decree to the contrary.

  6. Occupied means just that. Most models dont get their certificates of occupancy until they are sold (reserved). No C of O = no occupancy imho.

    For those that do obtain C of Os in advance, it’s still not occupied. It’s merely displayed.

    • Avatar don says:

      A blaring example of the underwriter missing the the explanations in the original descriptions. That employee of the lender should be noted and be used as an example of the lack of understanding and education from underwriters in general. She should have caught it when you suggested replacing the carpet and curtains as worn.

      • Baggins Baggins says:

        Sounds more like a round about argument against foreign labor outsourcing. It is an admission the lender has failed in it’s due diligence to control competent process. They are hiring outsourced underwriters whom don’t know what an open house is. Find a better client.

  7. Perry E. Turner, Jr. on Twitter Perry E. Turner, Jr. on Twitter says:

    Take pictures of empty closets and cabinets

    • Avatar don says:

      Any thing can be staged, our signature on the report makes us liable. if that signature is not good enough, they should not have contracted us. The underwriter can say anything and much denigrates Our reputation. Snap back like any mad dog, defend our reputation.

  8. AngeloDS on Twitter AngeloDS on Twitter says:

    Explain it. Same as with any other staged home.

  9. Shawn Vanderhart on Facebook Shawn Vanderhart on Facebook says:


  10. Avatar Dave says:

    I am appraising a house now that is in an estate and selling. The living area has everything moved out, however, the son, who is not the owner is still living in the basement. Which box should I check. Vacant, tenant occupied or owner occupied?

  11. Dave the property is being lived in. I assume they don’t have separate utilities for the basement, right? Box checking is a relatively unimportant part of real estate appraisal. Adequate explanation on the other hand is.

    You could argue either side of the question for your box inquiry IF you had enough explanatory discussion concerning your reasoning.

    Our profession has been seriously harmed by the entire concept of UAD riding adherence to marketing boxes or form lines a certain way as if that eliminates the need for discussion. Pleased do not confuse the very narrow GSE mandatory requirements as being representative of either good or necessary appraisal practice.

    When ‘boxes’ don’t have a definitive answer or applicability one way for the other market the one that makes the most sense, and then just explain it as you did here.

    I’d probably add the obvious – the son continues to live in the house but has vacated the main living area level (living in the basement) in order to facilitate showing the property to prospective buyers as it would appear empty; as well as for his own privacy during marketing.

  12. Lisa Calise on Facebook Lisa Calise on Facebook says:

    Actually, on second thought, I’d choose tenant and comment accordingly. As tenant does not always imply that there is money exhanged


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Is a Model Home Considered Occupied?

by Dustin Harris time to read: 2 min