Can you judge a book by its cover? Usually not! The same general question applies for appraising homes. Can you accurately appraise a home by its appearance alone? Ummm… not really! To be thorough, appraisers should be looking under the surface for energy efficient upgrades and improvements. This is an insightful article posted by Gary Kahanak:
“Money makes the world go ’round,” goes the old saying, and it’s certainly true in the world of residential energy efficiency. Many worthy home energy upgrade projects are cancelled or put on hold because the owners feel they won’t get their investment back if they should sell soon. Likewise for new construction, many builders in the speculative home market feel forced to build to the lowest performance standard, because energy upgrades won’t “appraise out.”
Plainly put, the appraisers are not doing their job, which should be to give a valuation adjustment for each feature of the home that is either above- or below-average, as compared to recent comparable sales in the area. Is it right for a house to receive additional value for granite countertops, glass mosaic tile and a whirlpool tub, but no additional value for a 95% efficient furnace, 19 SEER air conditioner and third-party verification to a high performance national certification? Of course not, but that is the current state of affairs. However, help is on the way……
Residential Green and Energy Efficient Addendum
The Appraisal Institute recently released a three-page form called the Residential Green and Energy Efficient Addendum to collect information about energy efficient and green features, such as insulation values, efficiencies of heating and air equipment, high peformance windows, geothermal heat pumps, ENERGY STAR qualification or a HERS Rating, etc. The form is meant to be used by appraisers, lenders, home energy raters and builders. The Appraisal Institute is encouraging Fannie Mae and Freddie Mac to use the form and even request it from appraisers. This form should be extremely helpful by somewhat formalizing the process, and also by educating all of the stakeholders.
If Your House is Above-Average…….Say So!
Few people realize that they have a right to request that their lender assign an appraiser who is skilled and competent at performing valuation adjustments for energy efficiency features. It is perfectly acceptable to provide documents and information to the lender or appraiser about features of your home that you think are above average. It is the appraiser’s job to verify that information, and give it an appropriate value.
While the appraisal industry may be getting a little pressure to change from above, it certainly won’t hurt to apply some pressure from the grassroots. For your next involvement in any aspect of a special, high performance home, remember to put the Residential Green and Energy Efficient Addendum in someone’s hands, and say, “This house is above-average……price it that way!”
