New Home Buyer: Log Home Purchase - Appraisal Concerns

[mike5809]

Hello All!

I saw this forum and during my research and it has been a great resource as I have heard horror stories about log home appraisals and have concerns and am just looking for information, which will helpfully put me at ease. I would be gutted if the appraisal came back low and killed the deal.

Backstory: For over two years my wife and I have been looking for a log home in south central Pennsylvania. We finally found a home a few weeks ago - it was on the market for just 5 days and already had 18 showings. The property had a ton of interest and we immediately put an offer in and meet with the homeowners for 2 hours that day. After talking with the homeowners we came to an agreement and a signed contract.

Home: Beautiful, solid log home which sites on about 10 wooded acres (3 clear acres around the home). It is 3 bedrooms, 2 baths, 2 stories, with a unfinished basement. Built in the late 1990s, around 1900 Sq.Ft with ~400 Sq. Ft. of extended covered porch. A fully paved 0.25 mile driveway, detached 24x30 garage, full security system, 1800 gallon pond, a 12x24 in-ground pool and hot tub, landscaped walking trails in the woods, and many new appliances. It is in immaculate condition - the homeowner has receipts for everything and had a very rigorous maintenance schedule which he followed to a T (staining the home - which was professionally done 2 weeks ago, maintenance on septic/water, etc). We have looked at many homes and this was by far the best non new construction log home - which our home inspector who is a log home builder agreed (his quote was that this home is well within the top 90% percentile of what he has inspected).

Lender: We chose a lender who is extremely familiar with log home loans, both construction and existing structures. We have everything buttoned up on our loan paperwork and have already had the home inspection completed. Our lender does not anticipate that there will be any issues with appraisal which is scheduled for Wednesday (it took about 2 days for someone to pick up the job). The lender is well aware of our concerns about the appraisal so I hope that was taken into account during the request for appraisal.

Area: It is a fairly rural area - 15 miles to the nearest town, lots of woods, farmland, etc. This home is more expensive than conventional homes in the area but right in line with log homes. After talking to a half dozen log home builders in the area for over 2 years my guess would be that it would cost about 10% more of the agreed upon purchase price to rebuild and that does not including the purchase of 10 acres, driveway, etc. The immediate area (2-4 miles) is a mix of older, not so nice homes and new construction very nice homes. There are two log homes on the street but they were built and occupied by the original owners (through my research). Another log home did just sell 2 months ago which is 8 miles away, it is bigger (400+ sq ft), uses a different type of wood, and is on 12 acres but it sold for $70,000 more and is in a flood plain - I am hoping that will be used as a comp.

Concerns: Hearing the horror stories about log homes, not being able to find comps, having an inexperienced appraiser who is not familiar with log construction, etc. I am certainly concerned on receiving a low appraisal. Are these concerns legitimate or am I making a mountain out of a mole hill? Has the process and accuracy of log home appraisals gotten better over the years, are appraisers more trained? Additionally I assume that they should take things like the land, garage, pond, pool, and 1/4 mile paved driveway into account, correct? (as the driveway alone would cost around $25k here to do).

I am hoping that the individual appraising the house knew beforehand that it was a log home and picked up the job because they had experience - but even reading this forum I see people pick up jobs that have never done a log appraisal and they ask questions like "does it cost more to build a conventional home or log home" - to me that is scary that someone asking that question would be deciding the fate of my home! The sellers indicated that their realtor created a CMA and our offer was a good bit under their asking price - so that makes me feel better. Additionally the sellers will be home during the appraisal and available to answer questions.

Also how accurate are some of the online appraisal sites? About half are coming in about 30% under purchase price, a fourth of them just under purchase price by about 10%, and a fourth are about 25% over purchase price. The ones under are generally a lot under but again I doubt they are taking into account log construction or any of the 'improvements'.

Any insights, suggestions, thoughts, advice, or anything would be appreciated.

 

[Denita Neuenhaus]

I'm not an appraiser so I will only answer the one question you ask at the end: "How accurate are some of the online appraisal sites?"

If you are referring to the automated valuation model (AVM) type sites similar to zillow's zestimates, then the answer is: Not at all accurate. Sometimes high and sometimes low and sometimes will accidently hit the actual market value, but that is extremely rare.

The algorithm is propitiatory so we don't know exactly what is included in Zillows zestimates. However, in some of the other well known AVM's the 'comparable' sales are listed so you can see which sales affected the posted value. These AVM's typically use a simple radius around the property for sales. The sales may or may not even be the same type of property. The AVM's do not take into account condition, location (except very generally); view and other features that are important to determine value. For example, I have seen townhomes and villas used to determine a value for a single family home. This is scary to me. Do not rely on the AVM type system at all for a value.

Commenting on rest of your post: with a good lender that is familiar with log homes, you should feel confident that the appraiser the lender engages would be also familiar with log homes. Just my opinion.

 

[Tim The Enchanter]

Lender: We chose a lender who is extremely familiar with log home loans, both construction and existing structures. We have everything buttoned up.....

Sounds like you have done all you can so far.
So, don't worry, be happy.

Hard to do when sitting on pins and needles I know. Good luck.

 

[Terrel L. Shields]

I have never had a happy experience appraising a log home. The lenders hate them and will vet the appraiser horribly. I would not touch one for less than $1,200. They are just the gaff that keeps on gigging you. So if you are otherwise maxed out and cannot kick in more cash at closing, don't get too excited yet. It will depend upon the comparables and nothing else.

As for Zillow et al, I posted this before...Now notice that this property has a range of nearly $100,000 on a $200,000 house which has been on the market for about 12 months. Which might be explained by its $425,000 price tag. I used Zillow, Trulia, Realtor, and Remax. Keep in mind that Trulia and Zillow are owned by the same folks yet were no where near each other.

 

[mike5809]

Thank you all so much for the information! We will just have to sit and wait for the results! How long does it usually take to hear the results after the inspection (which is on Wednesday)?

I am just going to hope for the best and think positive thoughts that the appraisal comes back favorable. With using a lender that specializes in log built homes I hope that risk was mitigated and no issues arise.

I can certainly understanding charging more for the log home appraisal, as I would imagine a lot more work has to be done to determine an accurate value. It is just hard for me to understand how variable this all is - it really just comes down to the appraiser and I think that has a ton of risk for receiving an inaccurate value. Not sure that there is a better but this whole experiencing has been eye opening to say the least.

 

[Meandering]

How long does it usually take to hear the results after the inspection (which is on Wednesday)?

If you hear on Wednesday evening, you're in trouble.
I would think that as the borrower, you won't hear anything before Monday, or over the weekend, if you're lender is working.

A lot of what is a "comp" will depend on the lender. We have more logs up here, than you do down there, but they are not "un-normal". They just might be further away than some lenders like.

Good luck.

 

[JTip]

and 1/4 mile paved driveway into account, correct?

To pave a 1/4 mile driveway can cost $50,000+++.

You will never get a dollar for dollar return when gravel will do. (My driveway is 1,850 ft....and it's gravel....unless I hit the lottery)

I'm curious....how much skin do you have in this deal? In other words, what kind of financing did you secure?

 

[Michigan CG]

Lender: We chose a lender who is extremely familiar with log home loans, both construction and existing structures. We have everything buttoned up on our loan paperwork and have already had the home inspection completed. Our lender does not anticipate that there will be any issues with appraisal which is scheduled for Wednesday (it took about 2 days for someone to pick up the job). The lender is well aware of our concerns about the appraisal so I hope that was taken into account during the request for appraisal.

Not to rain on your parade but just about every lender who wants to make a commission will tell you they are extremely familiar with log homes. Your concerns about the appraisal process are warranted. If I were in your shoes (and I am an appraiser) I would choose a small local bank where I know they don't use an AMC (Appraisal Management Company).

The AMC model mostly works like this: You pay an appraisal fee and the AMC then tries to find the cheapest appraiser they can find. They will start sending the order to someone who is cheap and fast and if that person rejects the job they will go to the next person. Not all of them work like that, and there are some good AMCs, but most of them do. Most of them will not ask about the appraiser's experience on goofy properties such as ones with ponds or large acreage or log homes.

In your post it (kind of) appears that your lender is using an AMC when you say "It took about two days for someone to pick up the job." That would be a warning sign to me. A small bank will look at an appraisal assignment and will know which appraisers can handle the job. An AMC rarely knows who is, and who isn't, capable of odd properties.

I have a few clients that don't use me often but do use me for odd stuff. I know how the process at one of the banks works. They tell the customer that the property is odd and they don't know what the appraisal fee will be until they make a phone call. The lender calls me and asks what the fee will be and then they communicate that back to the customer.

For your situation the best way to "vet" an appraiser for a log home property would be to find out if the appraiser who is doing your appraisal knows the definition of the word "chinking". If they don't know the word you have the wrong appraiser.

 

[Michigan CG]

One final thought.......... 1,800 gallon pond? Your pool is going to have ~12,000 gallons of water. An 1,800 gallon pond would be about the size of a small bathroom.

 

[Terrel L. Shields]

1,800 gallon pond would be about the size of a small bathroom.

Koi pond