Some green homes could possibly be under-valued, as outlined by panelists at a session during the 2019 Builder Show in Las Vegas – and that is often a costly mistake for home sellers.
To ensure energy-efficient features are counted, collaboration among appraisers, lenders, builders, and real estate professionals is critical, panelists said.
Real estate professionals on the panel urged home builders in the audience to involve them in the initial planning of their green properties to ensure energy-efficient features are well-documented and marketed and effectively valued from the beginning.
Are green features evaluated sufficiently in list prices?
Sandy Adomatis, an appraiser with Adomatis Appraisal Service in Punta Gorda, Fla., says studies from across the country have shown properties with green features sell for a premium of 2 to 5% higher than comparable properties. Homebuyers value features including lower energy costs and improved air quality, and show a willingness to pay more for them.
For homes with energy-efficient windows, insulation, rooftop solar panels or other features, property owners could find it advantageous to obtain a certification that documents sustainability features so they can use it in the future when it’s time to sell the home. Homeowners can get the properties evaluated with a Home Energy Rating System rating, LEED certification, or the EPA’s WaterSense or Indoor airPLUS labels.
A HERS rating, for example, will define the home’s energy efficiency.
“A HERS rating gives the appraiser numbers so they can quantify the energy savings, and that can help them properly value the home,” Adomatis said. It may be time-consuming and costly upfront in getting properties rated or certified, “but do you want to spend $300 to $400 more or potentially lose $5,000 to $10,000 at the closing table because the appraiser couldn’t value the energy efficiency of the home?”
Aside from the label, however, the documentation of sustainability features is essential to lenders and appraisers.
Real estate professionals can fill out the Appraisal Institute’s Residential Green and Energy Efficient Addendum, which is a form to document the home’s high-performance and sustainability factors. Also, they can market the features on the MLS. The National Association of Realtors®’ Green REsource Council offers a Green MLS Tool Kit which helps with the inclusion of green data entry fields on multiple listing services.
The panelists said real estate professionals ought to provide supporting information – for instance the addendum and MLS marketing information – to the lender when an appraisal is to be done. The additional information will help justify to the lender that you’ll require an appraiser educated in green features to value the property.
“The average appraiser would not know how to value the green home features,” said Craig Foley, GREEN, a real estate professional with Laer Realty Partners and Sustainable Real Estate Consulting Services in Melrose, Mass. “It is critical to get a qualified appraiser to make sure the value is reflected in the home.”
You can find appraisers who have gone through extra training to earn a Valuation of Sustainable Buildings certification at appraisalinstitute.org, said Foley. Once a lender has assigned an appraiser, search the directory to make sure they’re qualified in factoring in green attributes.
Case in point: James Mitchell, GREEN, a real estate professional and founder of RenewaBlue, a solar and efficiency consulting firm, teamed with home builders in the planning stages of L’Avenir in Fort Collins, Colo. He helped the builders purchase the land for the project and worked with architects, builders and energy raters to ensure the properties’ green attributes would be considered. He used the Green and Energy Efficient addendum, which was provided to the lender for the construction loan, and justified the need for an appraiser trained in valuing green features. He credits the additional information with assisting to get the properties appraised for 5% more in value than comparable properties that did not have the green features.
“Realtors need to be working with builders from the construction loan process so that lenders understand the value,” Adomatis said. “We need to train more real estate professionals, appraisers, and lenders to understand the value too.”
NAR provides the GREEN designation, which offers education on what makes a home green and also guidance on the proper way to market such properties to home buyers.
“It’s important to tell the full story of a property and communicate the benefits,” Amanda Stinton, NAR’s director of leadership and sustainability, told the audience. “If it’s not communicated to the public, the value is lost.”
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