Log home appraisal in a rural area

<<>> Log home appraisal case study.

There is a rumor going around and it goes something like this. Home owners will read something from a magazine and assume that the statement that was read is true in all cases. I’m here to tell you that while some of these basic observations are correct, most of the time they are dead wrong. Let me tell you about a Log home appraisal that I completed.

The subject property is a log home that is located in a rural setting with trees and mountain views. The lower portion of the property offers a creek and is fenced for horses. The home offers several outbuildings. This is fairly typical for many homes in a rural setting. My assignment was to determine the value of this home for the purpose of a refinance.

Now most lenders and appraisers want comparable homes and preferably log homes that are similar to the subject. Most log home appraisals will require at least two log homes in the appraisal. In this market area, there were a few homes that offered log home design, but they were far from the subject and further north from the city core.

I was able to locate a few other sales that were comparable, but all of the homes were further north of the subject. The good part was that they all offered similar appeal to the subject. The bad part was that they were further north than I wanted to go for comparable sales, as one could argue that the homes were outside the immediate area.

Of course, the first thing appraisers will look for is homes in the immediate area. This is by far better, because the appraiser will not have to drive around the entire county to get comps, but more importantly, homes in the immediate area will support the location and this is a major element of the appraisal. That said, however, the design of the home can be just as important as the location.

As it turns out, the first appraisal that I completed did not go through because the home owner did not have enough equity to continue with the loan. There finances changed in a few months. Two months later, they were able to try again. The bank required another appraisal. I just happened to be the same appraiser.

They were upset because the value of their home did not come into where they thought it should be. They told me that in all cases, homes closer to the city core will be valued more than homes further from the city core. He gave me several examples where this was the case. But the examples were taken from California and He now lived in WA. Do you think this is true?

I’ve been a full time appraiser for a decade now and I can assure you that this is not the case all of the time. All generalizations must not be used when appraising specific residential property. Many times, when I give a general statement about residential appraising, there has been a time in my career when I could prove myself wrong.

I told the owner that this is not the case all of the time and it just depends on the best comparable sales at the time of the appraisal. He continued to argue with me. I apologized and told home that I’d see if I can find closer comparable sales.

Well the second time around, I was able to locate closer sales to his home or to the south of his home. Do you know what the conclusion was? The homes in the immediate are made no difference in the value of his home. This means that the homes located to the north of his home or the south of his home did not make a significant value difference.

In this case, the real indicator for determining the value of his home was the LOG design and appeal. You see, before this, he had a Realtor pull comparable sales in the area. Guess what, the Realtor used all of the homes that did not support the design and appeal of the home. In other words, this Realtor pulled sales that were not comparable to the subject and; furthermore, they did not use sales any closer or further away than the LOG homes that I’d used in my appraisal report. The comp selection made a $20,000 difference. But the real question is are they the best comps?

So does this mean that all log homes are valued less than other homes with differing “modern” siding. NO, absolutely not, but in this case it sure was. So the moral of the story is that while there are a lot of generalizations about real estate, they should not be applied to any properties, because if you do, you could be wrong.