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Damaged Properties


It is disconcerting to note that a significantly high number of “bad house” cases involve new construction. In Kentucky, the measure of damage is the cost-to-cure/repair, or diminution in value, whichever is less. Thus, a contractor is typically employed to estimate the cost-to-cure, and an appraiser is hired to estimate the diminution in value. Be advised, an appraiser is not a professional home 

inspector/structural engineer, which is outside the realm of the appraiser’s expertise. That said, this appraiser highly recommends that a home/structural inspection be made prior to purchase.

In the past, the term caveat emptor or “buyer beware” was assumed in real estate purchases. Today, with seller’s disclosure, the term “seller beware” may be more appropriate. Most states now require the seller to disclose property defects. If a seller has any thoughts an item should be disclosed, it probably needs to be disclosed. Consult a knowledgeable real estate attorney prior to signing a seller’s disclosure form.

Currently, the seller’s disclosure (or lack thereof) of known faults/problems is a hot topic, as they may become fertile ground for litigation. Some attorneys have actually advised sellers not to perform a home inspection prior to listing the property for sale as the inspection may uncover defects that the seller will be required to disclose.  

Without quoting scripture, the building’s foundation is typically the most significant construction component regarding damage. For example, if a seller discloses “I had a bad roof and repaired it”, a typical buyer would assume that was a good thing. However, if a seller discloses, “I had a bad foundation and repaired it”, a typical buyer becomes very apprehensive. In most cases, defects that a typical buyer can not visually see or comprehend, generally result in the highest degree of buyer resistance, as they are unknown or unforeseen. Should the defect result in damage, the appraiser typically estimates the diminution in value.

In one case the family dog proved to be the best witness, the results may be seen in the photograph at top right. This court case involved significant structural cracks throughout the residence that had a walk out basement. The owner’s dog started digging under the basement for a cool place to rest and uncovered builder did not do any foundation work, and simply poured a concrete slab on top of the soil to cut costs.

Bailey Appraisal Service has estimated the diminution in value in court cases involving chemical contamination, stigma, construction faults, fire damage, termites, and bad foundations. With over 200 court appearances as an expert witness in both Federal and Circuit Courts throughout Kentucky, James F. Bailey of Bailey Appraisal Service can appraise most any litigation needs.

The family dog discovered there was no foundation work.
The family dog discovered there was no foundation work.




The Fifth Amendment to the Constitution of the United States is a wonderful thing. Among other rights, it provides “nor shall private property be taken for public use, without just compensation”. Most of condemnation proceedings within the Commonwealth of Kentucky involve right-of-way takings for new roads, the widening of existing roads, or urban renewal. The appraisal valuation is based upon a “before and after” format, based upon the valuation of the property immediately before the taking and immediately after the taking.

In the case of right-of-way takings, the condemning authority makes an initial offer to the property owner based upon value conclusions of the appraiser(s) hired by the Commonwealth. Should the property owner not agree with the initial offer, the owner has the right to a Commissioners’ Award. Under Kentucky law, the Court appoints three commissioners to establish the value of the property being condemned who are “impartial housekeepers of the county who are owners of land”. If neither party takes exception to the Commissioners’ Award, this becomes the value of the property once an interlocutory judgment is entered. The date of entering the interlocutory judgment is the proper “taking date” for fixing a value. Should the property owner not agree with the Commissioners’ Award, the owner is entitled to a jury trial.

In some takings, damage exists; however, are considered noncompensable as they are “sacrifices which society has the right to inflict for the public good.” In Kentucky some noncompensable items include: noise, circuitry of travel, business losses, interruption of business, inconvenience, nonwillingness to sell, and goodwill. While the Commonwealth v. Sherrod case held that loss of business is noncompensable, the R.J. Corman Railroad Company/Memphis Line v. Commonwealth may open the door for additional compensation in some cases when employing the “Income Capitalization” method of valuation in the before and/or after values. Loss of business has always been compensable when the taking alters the highest and best use of the property.

In addition to the compensation of land/buildings taken, a significant amount of damage may be incurred including: proximity damage (external obsolescence), economic obsolescence, grade changes, loss of access, severance damage, landlocked remainders, change in highest and best use, reduction in economic size, and other cost-to-cure (curable obsolescence) items of damage. These items are compensable and will increase the amount of just compensation due the owner.

A number of road widenings involve proximity damage or constructing the new right-of-way limits or road closer to a residence or building. An example was a case that was a part of the Paris Pike project in Fayette County. Before the taking, the distance from this residence to the right-of-way was 125 feet. After the taking, this distance was reduced to 34 feet for a percentage of yard area loss of 73%, which is significant. The new right-of-way limits after the taking may be seen in the form of the stone fence/wall, seen in the photograph at top right.  Bailey Appraisal Service represented the client and this case was settled out of court. 

Having appraised more than 500 "before and after" parcels for condemnation proceedings and appearing in various Courts as an expert witness more than 200 times, James F. Bailey can represent your condemnation, and litigation appraisal needs.


   Proximity Damage with the stone wall the new right-of-way line.
Proximity Damage with the stone wall the new right-of-way line.

Family Law


Most of divorce proceedings simply involve only the estimated current fair market value of the property(s) in question. More complex assignments involve capturing the estimated fair market value as of specific points in time, such as the date of purchase, date of marriage, and when improvements were made to the property. Value estimates made in the past are “retrospective” value estimates.

Until recently, the Brandenburg v. Brandenburg 617S.W.2d871 (1981) formula ruled the landscape of domestic relations law in Kentucky. Apparently, Brandenburg did not address the issue of the infusion of nonmarital contributions to the real property in an adequate manner, and the Supreme Court of Kentucky rendered an opinion in the Lyon Circuit Court’s Travis v. Travis Case (52S.W.3d 904 (2001).

The appraisal methodology of the “Travis Case” was tested in the Fayette Circuit Court regarding the Rutherford v. Rutherford (01-CI-0659) matter. In this case, the appraiser was asked to estimate the current fair market value of the property, allocate the value of the nonmarital contributions or improvements, and estimate any change in value attributable to general economic conditions. 

James F. Bailey of Bailey Appraisal Service passed muster in this case regarding the appraisal methodology and set a precedent in the Fayette Circuit Court, and arguably the Commonwealth of Kentucky. 

Mr. Bailey has been a guest lecturer in Justice James E. Keller’s family law class at the University of Kentucky relating to appraisal methodology in Travis v. Travis.




Ashland -The Henry Clay Estate (Fayette County)

It is interesting to note that Henry Clay never resided in the residence that may be seen today. The former residence (1806-1811) was damaged, possibly because of an earthquake, and his son rebuilt the residence as seen today on the same foundation. Thus, the historical significance is mostly attributable to the grounds and ancillary buildings that Henry Clay used.  

James F. Bailey of Bailey Appraisal Service has appraised this historically significant curtilage.


Ward Hall  (Scott County)

Arguably the largest and grandest example of Greek Revival design in Kentucky, Ward Hall was built for Junius Ward in the 1850s and designed by locally noted architect Thomas Lewinski. Unique construction items included a large copper tank in the roof that supplied water, and a coquina stone foundation. At one-time Ward Hall was offered to the Kentucky Legislature to be the State Capitol.

James F. Bailey appraised the curtilage for estate planning.


Woodburn Farm (Woodford County)

Purchased in 1790 by Robert Alexander, Woodburn Farm gained national prominence as a thoroughbred nursery operation. His son, Robert Aitcheson Alexander was a significant influence within the industry. Noted studs to stand at Woodburn include “Lexington."
James F. Bailey has appraised this historically significant curtilage for property division.


Xalapa Farm (Bourbon County)

This farm was founded by Edward Francis Simms in 1897 and is stunning with the extensive use of stone work including bridges and a water tower. 

James F. Bailey appraised this farm as part of a land division.

Marylou Whitney Stables, LLC (Fayette County)

 An Equine and entertainment jewel on Bryan Station Road was founded by C.V and Marylou Whitney. The farm is improved with fine soils and North Elkhorn Creek meanders through the central section. The original tract ran from Bryans Station Road to the Paris Pike and was reduced to 72.18 acres. James F. Bailey appraised the farm for estate planning.

Ashland - The Estate of Henry Clay
Ashland - The Estate of Henry Clay