The Peculiarities of Appraising and Investing in Log Homes

  11,000 square foot log home in Montana, appraised in 2017

Log homes were originally built in Scandinavia and Eastern Europe as early as the Bronze Age (thousands of years ago), due to the abundance of softwood timber such as pine, cedar and spruce in these locations. These softwoods are easier to cut and built with than hardwoods. 

Scandinavian craftsmen brought such construction techniques to the United States, where such homes became popular in the Western and Southern states, where softwood conifers were more abundant. 

The advantages of log home construction are thermal insulation properties and the beauty of the materials. Log homes stay warmer in the winter and cooler in the summer, and I only first saw them on family vacations to Colorado from childhood homes in Texas and Iowa. 

 Imagine my surprise when I moved as an appraiser from Texas in 1988 to work for the largest and loan association in the U.S. in California (Home Savings of America), to find that the lender refused to lend on such properties. 

As it turns out, there are disadvantages to log home construction that impair their long-term financial viability and make them foreclosure risks. Log homes are often desired for their beauty and their thermal insulation qualities, but such homes also have less marketability compared to conventional homes for the following reasons: 

 • Higher expense of upkeep, such as the need for annual exterior cleaning (power washing) to wash out insects and fungus (that occurs from rot and ultraviolet damage), and increased dusting on interior wall surfaces that are not vertical

•Higher insurance costs (due to the need for specialists to do repairs) 

• Insect infestations 

• Rot 

• Inability to obtain mortgage financing. Log homes seem to become more likely to become foreclosures due to unanticipated costs and inability to refinance or sell. 

• Fire risk is actually not considered to be worse than conventional homes on conventional wood stud frame homes.

Insect bore-hole

Wood rot 

For these reason, any lender wanting an appraisal of a log home should insist that all of the comparable sales be similar log homes.