# Leroy Was Ready to Close. Then the Underwriter Noticed It Was a Log Cabin.

By Will Cupp (@willcupp) · Published 2026-10-22

Canonical: https://voce.com/@willcupp/leroy-ready-close-underwriter-noticed-log-cabin-m07x6m

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**I realize there are many answers to real estate questions, and I value everyone's opinion. I'm sure many of those answers come from valuable research and facts. I try very hard to include that information, too.**

**But I want you to understand something. The best answers I can give you won't always come from statistics, although I'll share those with you as well.**

**You see, I'm not just answering these questions. I've lived a lot of them. I've watched them play out over more than 30 years in real estate.**

**And although I may change the names, my stories are real. The people who lived them with me are real, too.**

**My hope is that when you read my answers, you're not just getting facts and figures. You're getting something a little different. You're getting a living, breathing answer from someone who was actually there.**

## How Do You Price a Rental Cabin in Gatlinburg, Pigeon Forge, or Sevierville? On Comparable Sales or Rental Income?

Well, I'm going to give you an answer based on more than 30 years of selling cabins here in the Smoky Mountains.

In most of the cabin transactions I've handled, comparable sales have been the foundation for determining market value. Rental income certainly matters, especially to an investor, but a cabin doesn't automatically become worth more simply because somebody has been making a lot of money renting it.

Now, there are specialized lending programs and appraisal methods that can consider rental income. And I'm going to explain a little about those, too.

But here's what I really want you to understand.

Just because your cabin produces $100,000 a year doesn't necessarily mean a buyer's mortgage company is going to agree with the price you think it ought to bring.

And that can create a problem when you're trying to sell.

Let me tell you about a friend of mine named Leroy. He learned something about financing log cabins that surprised even him.

## A rental cabin is still a piece of real estate

Now, I've been involved in the cabin rental business around Gatlinburg, Pigeon Forge, and Sevierville for a long time.

I've watched these mountain properties go from relatively simple vacation cabins to some of the most elaborate rental homes you can imagine.

Good gracious, some of them have indoor swimming pools, movie theaters, game rooms, and enough entertainment to keep a family busy for a week without ever leaving the house.

But when it comes to selling one, there's something important to remember.

That beautiful cabin is still real estate.

And in most of the residential cabin transactions I've handled, appraisers have relied heavily on comparable property sales to develop their opinion of value.

We call those comps.

They look for properties similar to yours that have recently sold.

They consider location, size, condition, age, construction, views, amenities, and the differences between your property and those comparable sales.

And around here, those differences can be substantial.

You might have two cabins with three bedrooms each.

One sits on a beautiful, easily accessible lot with mountain views.

The other is perched on a hillside where getting up the driveway might make you want to put on a seat belt and say a little prayer.

Lol.

Those properties aren't necessarily going to have the same value.

And that's why knowing this area matters.

## But what if my cabin makes twice as much rental income?

Now, here's where sellers sometimes get confused.

Let's say you have a cabin that brings in $100,000 a year in gross rental revenue.

Another cabin in the same general area, about the same size, only produces $65,000.

Naturally, you're going to think yours ought to be worth considerably more.

And maybe it is.

But we need to understand why it's making more money.

Maybe your cabin has better amenities.

Maybe you've got a swimming pool, a wonderful view, or something that makes guests want to book it instead of the competition.

Those are things a buyer and an appraiser may recognize as contributing to value.

But maybe you're just exceptionally good at managing the property.

Maybe you work closely with the rental company.

Maybe you've built a loyal group of repeat guests over the years.

Maybe you're terrific at advertising, keeping your calendar full, and adjusting your rates.

And if that's the case, I congratulate you.

But here's the question.

Can the next owner do what you're doing?

That's what you've got to think about.

A buyer may not have your experience, your relationships, or your ability to manage the cabin.

They may hire a different rental company.

They may have different expenses.

And they may not be willing to count on earning the same amount you did.

So although your rental history is certainly valuable information, it doesn't automatically establish the property's market value.

That's something I've tried to explain to sellers for years.

## How does an appraiser determine what a cabin is worth?

In my experience, the sales comparison approach has been the primary method used in most residential cabin appraisals.

And there's a good reason for that.

It looks at what buyers have actually paid for similar real estate.

Now, the income approach is a recognized appraisal method, too. Fannie Mae allows it to be considered for certain residential rental properties, and it may be necessary when the rental market is an important part of establishing value.

But under its conventional residential appraisal guidelines, the income approach cannot be the only method supporting the appraisal.

So when somebody tells me their cabin should be worth another $200,000 because it had a great rental year, I'd ask them something.

"Well, that's wonderful. But can we find comparable sales that support that price?"

Because here's what can happen.

You list the cabin for $800,000.

A buyer falls in love with it and offers you $800,000.

Everybody's happy.

Then the appraiser comes out and determines the property is worth $700,000.

Now what?

The buyer may have to bring additional cash, the parties may have to renegotiate, or the financing may not work.

And suddenly that wonderful offer has turned into a problem.

That's why I believe sellers need to look carefully at what the comparable sales are telling them before deciding how much to ask.

## Rental income can help the buyer qualify for financing

Now, here's another part of this business that gets interesting.

Sometimes rental income can make a difference in whether a buyer qualifies to purchase a cabin.

And I'm not just talking about what the property is worth.

I'm talking about the buyer's ability to get a loan.

There are financing programs that allow certain rental income to be considered when determining whether an investor qualifies.

For example, Fannie Mae updated its guidelines in September 2026 to allow documented short-term rental income to be considered for certain one-unit investment properties.

But there are restrictions.

The property has to qualify. The rental activity has to be legally permitted. The lender has to follow specific documentation and income-calculation rules.

And depending on the buyer's circumstances, the allowable income may only help offset the property's housing expenses rather than provide additional qualifying income.

In other words, just because your cabin brought in $80,000 last year doesn't mean the lender is going to add $80,000 to the buyer's annual income.

Lol. Wouldn't that make getting a loan a whole lot easier?

The lender has to determine how much income can actually be counted under the particular loan program.

And that can make a tremendous difference.

Sometimes a buyer who couldn't qualify under one loan program may have options under another.

But I would always recommend talking with a knowledgeable lender who understands investment properties and short-term rentals before making assumptions.

Because not every mortgage program treats rental income the same way.

## I remember when getting a mortgage was almost too easy

Now, this brings back some memories.

Those of us who worked through the real estate boom of 2006 and 2007 remember some pretty interesting lending practices.

There were mortgage programs everywhere.

And it sometimes seemed like if one program wouldn't approve a buyer, somebody was working on creating another one that would.

Good gracious, there were times when I wondered whether you needed much more than a pulse to qualify for a mortgage.

Lol.

Now, I don't mean every lender was irresponsible, and there were certainly many good loans being made.

But some of those lending practices contributed to the problems that became painfully obvious during the financial crisis.

People were purchasing properties they couldn't comfortably afford.

Some were depending on rental income or appreciation that didn't materialize.

And when the market turned, things got ugly.

I was here.

I watched it happen.

And I watched people lose properties they had worked hard to acquire.

So when somebody starts talking to me about creative financing, I don't automatically assume there's anything wrong with it.

There are legitimate specialized lending programs.

But I do want to know exactly how that loan works.

And I'd certainly want the buyer to understand the risk.

Because a creative mortgage doesn't necessarily make a bad investment a good one.

Sometimes it just makes the bad investment easier to buy.

And that's something worth remembering.

## Leroy and the log cabin that almost didn't close

Now, let me tell you about Leroy.

Leroy is a friend of mine, and he called me about a situation that had come up with a cabin transaction.

He was getting ready to close.

Everything seemed to be moving along.

Then the underwriter came back with a problem.

The property was a log cabin.

And the particular mortgage program they were using didn't allow that type of construction.

Leroy couldn't believe it.

He told me something along the lines of, "Will, we're getting ready to close, and now they're telling us this loan won't work because it's a log cabin!"

Well, I understood his frustration.

And here's the thing.

Leroy wasn't somebody who didn't know what he was doing.

He was knowledgeable, experienced, and pretty good at keeping up with things.

But he wasn't working in the middle of the Smoky Mountain cabin market every day.

And I explained something to him.

"Leroy, around here, you'd better know whether that lender and that loan program will finance a log cabin before you get too far down the road."

Now, that doesn't mean log cabins can't be financed.

They absolutely can.

In fact, Fannie Mae's published guidelines recognize log homes as potentially eligible properties, provided the appraiser can develop a reliable opinion of value and the property meets the other requirements.

But a particular lender or mortgage program may have additional restrictions.

And that's where people can get themselves into trouble.

They find a lender who offers a wonderful rate.

The buyer gets excited.

Everybody starts working toward closing.

And somewhere along the way, somebody discovers that the particular property doesn't qualify for that loan.

Good gracious, that's not something you want to discover a few days before closing.

And it's especially frustrating when the problem could have been identified much earlier.

## Around here, knowing the area is more than knowing the roads

Here's something I really believe.

When you're buying or selling property in Sevier County, local experience can make a tremendous difference.

And I don't mean simply knowing how to get from Sevierville to Gatlinburg without getting stuck in traffic.

Lol.

I'm talking about understanding the kinds of properties we have here.

Log cabins.

Mountain homes.

Properties with steep driveways.

Private wells.

Septic systems.

Overnight rental restrictions.

Unusual construction.

And neighborhoods where comparable sales may be difficult to find.

Those things matter.

For example, some financing programs have restrictions on certain property types.

An appraiser may need additional information to establish the value of a unique mountain home.

A lender may need to know whether the property is going to be a primary residence, a second home, or an investment property.

And those aren't necessarily interchangeable classifications.

Just because somebody plans to use a cabin for vacations doesn't mean they can automatically finance it as a second home if they're primarily operating it as a rental business.

That's a question for the lender and the loan program.

Then you've got other things to consider.

Is the property served by a septic system?

Does the permitted septic capacity support the number of bedrooms being advertised?

Is there a private well?

Are there recorded easements for access?

And if the cabin is being sold as an overnight rental, is that use actually permitted?

Now, those things don't all determine the price by themselves.

But they can certainly affect what a buyer is willing to pay, whether the property qualifies for financing, and whether the transaction makes it to closing.

That's why I believe an agent working outside an area they know needs to do some additional homework.

And sometimes the best thing they can do is involve somebody who works in that market every day.

## What if my cabin is an exceptional rental performer?

Now, I don't want you to think rental income doesn't matter.

It certainly does.

If you've got a cabin with a strong, well-documented rental history, that information may make the property more attractive to investors.

And in some circumstances, a buyer may be willing to pay a premium because they believe the property's earning potential supports it.

Maybe they're paying cash.

Maybe they're bringing a large down payment.

Maybe they're using a specialized investment-property loan.

Or maybe they've got their own rental business and believe they can make that cabin perform even better.

That's entirely possible.

But here's where I'd be careful.

Just because a buyer is willing to pay more doesn't mean every lender will finance that price.

And if that buyer is depending on conventional financing, the appraisal may become an issue.

Now, if the buyer has enough cash to make up the difference, there may be a way to complete the transaction.

But those are things I want to know before we get too excited about an offer.

Because I'm not nearly as interested in getting you an offer for a million dollars as I am in helping you get a transaction closed for an amount that actually makes sense.

There's a difference.

And if you've ever watched a wonderful offer fall apart because of financing, you know exactly what I'm talking about.

## How I'd price a rental cabin today

Here's how I'd approach pricing a cabin if I were preparing to sell it.

First, I'd look at recent comparable sales.

I'd want to know what similar cabins in that area actually sold for.

Not just what sellers are asking.

What buyers paid.

Then I'd look at the properties currently on the market.

Because those are your competition.

If somebody can buy a similar cabin with a better view and more amenities for less money, we'd better have a pretty good explanation for why yours should bring more.

Next, I'd look at the cabin itself.

The condition.

The location.

The access.

The amenities.

The construction.

And any special features or limitations that might affect its marketability.

Then I'd look at the rental history.

And I mean actual, documented rental history.

Not what somebody thinks it might make next year.

If your cabin has produced excellent income, that's something I'd want potential buyers to know.

But I would be careful about presenting that income as a guarantee of future performance.

I've talked about that in some of my other articles, and I believe it strongly.

The seller can document what the cabin has done.

The buyer needs to determine what they believe it can do for them.

And finally, I'd consider what kind of financing a likely buyer may be using.

Because there's not much sense in pricing a property at a number that buyers want to pay but can't realistically finance, unless you're prepared to market it to buyers with other financing options or enough cash.

Now, that doesn't mean we should automatically price every cabin at the lowest comparable sale.

Not at all.

There may be good reasons why your property deserves a higher price.

But we'd better be able to explain those reasons.

And we'd better have some evidence to support them.

## Sometimes the numbers just don't agree

Here's something I've learned after three decades in this business.

Sometimes you can have a beautiful cabin, a wonderful rental history, and an owner who's done everything right.

And the numbers still don't support the price they want.

That's a difficult conversation.

Because the owner may have spent a tremendous amount of money improving the property.

Maybe they installed a swimming pool.

Maybe they remodeled the entire cabin.

Maybe they've developed a successful rental business around it.

And they believe all that work should translate directly into a higher selling price.

Well, some of it might.

But the market isn't necessarily going to reimburse you dollar for dollar for every improvement.

And an appraiser isn't going to add $100,000 to the value of a property simply because you spent $100,000 improving it.

The question is how those improvements affect the property's value in the eyes of the market.

That's why I always encourage sellers to look at the comparable sales first.

And then look for the things that make their property different.

Sometimes those differences support a higher value.

Sometimes they don't.

And sometimes the best answer is to price the cabin competitively and let interested buyers decide how much those special features are worth to them.

## The bottom line

So, how do you price a rental cabin in Gatlinburg, Pigeon Forge, or Sevierville?

On comparable sales or the income it makes?

I would start with comparable sales, then use the rental history, amenities, condition, and investment potential to help explain what makes that particular cabin attractive to buyers.

Income can matter tremendously.

It can influence investor demand.

It can affect what a buyer is willing to pay.

And under certain financing programs, documented rental income may help a buyer qualify.

But rental income alone doesn't automatically determine the value of the real estate.

And if the buyer needs financing, the lender and appraiser may have a whole different set of questions.

Just ask my friend Leroy.

He was getting ready to close on a cabin and discovered that the particular loan program didn't want anything to do with financing a log home.

And that's why I believe local knowledge matters.

We've got some unusual properties here in the Smoky Mountains.

Beautiful properties.

Valuable properties.

And sometimes properties that don't fit neatly into the same box as a three-bedroom house sitting on a level lot in another part of Tennessee.

So before you decide what your cabin is worth, find somebody who understands the market.

Look at the actual sales.

Look at the income.

Look at the property.

And make sure you've got a price you can reasonably defend.

Because here's something I've learned.

You can have the best rental cabin in the Smoky Mountains, but if the price doesn't make sense to the buyer, the appraiser, or the lender, you may have a beautiful cabin that simply isn't selling.

And after all these years, I've found that getting a cabin sold is a whole lot more important than just putting a big number on a sign.

Lol.

> "A false balance is abomination to the LORD: but a just weight is his delight." (Proverbs 11:1)

Hope that helps. God bless.

Will Cupp

Sevierville Realtor and Real Estate Broker

[Realty Executives Associates](https://www.realtyexecutives.com/offices/realty-executives-associates---maryville/966)

865-654-9807

[www.willcupp.com](https://willcupp.com)