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 or 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.