Log home- adjustments

[Unique Situation]

Log home owner here - no comps, big surprise. My questions are: 1) Should older homes (13-20 years older than mine) be adjusted for age? This had zero adjustments. Can this be valid? 2) Should one-year-old comps be time adjusted? Real estate in my area had an average 4% increase over the past year. 3) Not a single upgrade was included in the report. Is this common? Fannie Mae & Freddie Mac do not require unique or same nontraditional homes be included in the comps. The appraiser used year-old comps of older log home sales far away and then made relatively big adjustments except of course the ones above. Thoughts? Thank you for your time.

 

[Elliott]

I don't know the Maryland market for log homes, but I've done my fair share where I'm at. Of course its best to compare apples to apples. I'm not going to second guess the appraisal, but depreciation is different for log homes if you try to compare them to other more conventional single family homes. I think there is a recognition the market for log homes is a fairly small fraction of other homes, which limits the number of potential buyers, and like other unique houses, appraisers tend to be more conservative. What are your upgrades and how old is your home?

 

[Unique Situation]

I don't know the Maryland market for log homes, but I've done my fair share where I'm at. Of course its best to compare apples to apples. I'm not going to second guess the appraisal, but depreciation is different for log homes if you try to compare them to other more conventional single family homes. I think there is a recognition the market for log homes is a fairly small fraction of other homes, which limits the number of potential buyers, and like other unique houses, appraisers tend to be more conservative. What are your upgrades and how old is your home?

My home is 14 yrs old. The homes in the comps were 27-34 yrs old. Upgrades: granite counter, custom rail & trim, solid wood flooring (no carpet), tongue & groove interior walls, our own1,000 gal buried propane tank, custom walk-in shower, 70 gal air jet tub, 80 gal water heater, custom built-ins, Energy Star windows & doors, 2 stage furnace. Thanks!

 

[Terrel L. Shields]

Your upgrades are pretty common. Probably no market evidence to support an adjustment. Propane tanks are personal property. Access to gas or heat source is assumed. Condition rather than age is a factor. Without seeing the comps I cannot say whether there should be adjustment. Yes, Selling guide says you can use conventional construction but I would bet a dollar to a cheap donut if the appraiser didn't use at least 2 log comps they would be flogged to death by the underwriters. Lenders tend to be prix about such things. With only log homes I doubt you could make a time adjustment you could support with log home sales. Log homes are often valued cheaper because they are harder to market. Sorry. I like log houses but the market isn't often kind to them.

 

[jay trotta]

Will agree with "T" in regards to similarity, why ?
OP - "My home is 14 yrs old. The homes in the comps were 27-34 yrs old. Upgrades: granite counter, custom rail & trim, solid wood flooring (no carpet), tongue & groove interior walls, our own1,000 gal buried propane tank, custom walk-in shower, 70 gal air jet tub, 80 gal water heater, custom built-ins, Energy Star windows & doors, 2 stage furnace. Thanks!"

Don't know your market area, but think of Age as an indicator; most people improve houses to fit there wants & needs over time, in general every 10-15 years some upgrades & improvements take place naturally (wear & tear) always hard to know what "they actually did", not being the appraiser involved.
Just a thought or two

 

[Mark K]

….. Propane tanks are personal property. ……... if the appraiser didn't use at least 2 log comps they would be flogged to death by the underwriters. ......…..Sorry. I like log houses but the market isn't often kind to them.

I think once propane tanks are buried they become part of the real estate.

In a my market there are probably 5-10 log homes and they rarely sell. The last log home I appraised I used atypical design but more conventional style construction comps; the lender didn't have a problem. Essentially you make a reasonable 'functionally similar' argument and it goes through. Same for a very nice timber frame home I appraised. On that one the owner wanted me to use timber frame homes only for comps. I told him I could but the fee would be in the $2,500 to $3,500 range because the research and driving all over the state would take me close to a week. He decided that functionally similar comps would suffice.

I also like the looks and feel of a log home but don't want one in this climate; too much exterior maintenance due to the extreme temperature variations and humidity/wet seasons, plus they cost about 50% more than traditional construction, that's if you can find someone in this area that knows how to build them. Plus they rarely sell for much if any premium over standard construction, except to the ONE special buyer, but not the typical market participant.

As far as adjustments for the OP, you have a home that a VERY small percentage of the buyers want. (If buyers really wanted them, there would be more of them.) A lot of them SAY they want them but generally they buy something more conventional. This creates a problem in the valuation process resulting in uncertainty and a wide range of value opinions. Making relatively small, unsupported adjustments (in relation to the overall property) is unwise. IMO, using log comps from another market and making large adjustments due to location is also a bad idea but that's just my opinion.

 

[Renee Healion]

Log home buyers are committed to the type of construction, are very deliberate in their choices, and then they stay in place. They are in for the long haul. If you look, you will see that there are very probably few listings that are expired unsold. They do not dabble in the market, testing like some owners do.

So, besides their small numbers, they are by proportion infrequently seen on the market. All the more fun for an appraiser. If you were set on a log house, and you did not plan to build new, you would go where they are, and that means farther afield. The appraiser probably worked hard and looked for the most comparable properties. Agree that some items are replacements and others do not necessarily merit adjusting.

 

[Unique Situation]

Your upgrades are pretty common. Probably no market evidence to support an adjustment. Propane tanks are personal property. Access to gas or heat source is assumed. Condition rather than age is a factor. Without seeing the comps I cannot say whether there should be adjustment. Yes, Selling guide says you can use conventional construction but I would bet a dollar to a cheap donut if the appraiser didn't use at least 2 log comps they would be flogged to death by the underwriters. Lenders tend to be prix about such things. With only log homes I doubt you could make a time adjustment you could support with log home sales. Log homes are often valued cheaper because they are harder to market. Sorry. I like log houses but the market isn't often kind to them.

Thank you for the detailed answer. If you are comparing condition what are you comparing? My upgrades may be common however, none of the comps used had them. As background the lender is in agreement with the Fannie Mae and Freddie Mac Appraisal Rules for unique homes. Apologies for my ignorance on this but just reviewing recent (conventional) sales how does age not factor in determining appraisal value? Same neighborhood, similar lots, similar house size, biggest difference age of house; newer sold for significantly more. Go figure the one time you want age to be a factor & it's not.

 

[Unique Situation]

Will agree with "T" in regards to similarity, why ?
OP - "My home is 14 yrs old. The homes in the comps were 27-34 yrs old. Upgrades: granite counter, custom rail & trim, solid wood flooring (no carpet), tongue & groove interior walls, our own1,000 gal buried propane tank, custom walk-in shower, 70 gal air jet tub, 80 gal water heater, custom built-ins, Energy Star windows & doors, 2 stage furnace. Thanks!"

Don't know your market area, but think of Age as an indicator; most people improve houses to fit there wants & needs over time, in general every 10-15 years some upgrades & improvements take place naturally (wear & tear) always hard to know what "they actually did", not being the appraiser involved.
Just a thought or two

Thank you!

 

[Unique Situation]

I think once propane tanks are buried they become part of the real estate.

In a my market there are probably 5-10 log homes and they rarely sell. The last log home I appraised I used atypical design but more conventional style construction comps; the lender didn't have a problem. Essentially you make a reasonable 'functionally similar' argument and it goes through. Same for a very nice timber frame home I appraised. On that one the owner wanted me to use timber frame homes only for comps. I told him I could but the fee would be in the $2,500 to $3,500 range because the research and driving all over the state would take me close to a week. He decided that functionally similar comps would suffice.

I also like the looks and feel of a log home but don't want one in this climate; too much exterior maintenance due to the extreme temperature variations and humidity/wet seasons, plus they cost about 50% more than traditional construction, that's if you can find someone in this area that knows how to build them. Plus they rarely sell for much if any premium over standard construction, except to the ONE special buyer, but not the typical market participant.

As far as adjustments for the OP, you have a home that a VERY small percentage of the buyers want. (If buyers really wanted them, there would be more of them.) A lot of them SAY they want them but generally they buy something more conventional. This creates a problem in the valuation process resulting in uncertainty and a wide range of value opinions. Making relatively small, unsupported adjustments (in relation to the overall property) is unwise. IMO, using log comps from another market and making large adjustments due to location is also a bad idea but that's just my opinion.

Thank you for this very helpful detailed response. You are right on the $ about the cost to build. I have read they sell for 20-30% more than conventional homes but not sure I believe that seeing how difficult they are to appraise to current market value.