Green Scene
Fair Green Value
Here’s how to get your next green home appraised to the hilt.
Building sustainable homes today makes sense: Consumers want them, you know how to build them, and many municipalities demand them. The last frontier to full-scale green home acceptance, however, is financial: specifically, it’s making sure a home will appraise for its full value. The Appraisal Institute is working
double time to catch up to green building practices while addressing other issues within its industry, such as the inflated appraisals that contributed to the housing bubble. In fact, a law put in place in May 2009 in response to escalating foreclosures actually works against green appraisals, explains Sandy Adomatis of Adomatis Appraisal Service, Punta Gordo, Fla. Called the Home Value Code of Conduct (HVCC), the law prevents lenders from putting undue pressure on the appraiser to inflate a value. Because of this law, a third party must order an appraisal for a home, and these companies often hire appraisers on a rotational basis. So the appraiser sent out to look at your home may not have any experience assessing a green home.
“The green property needs an
appraiser that has knowledge of the product to provide a credible result,” says Adomatis. “Many builders are under the impression they cannot talk to the appraiser. But that is not true: The builder, realtor, homeowner, and appraiser need to communicate on all assignments.” According to Adomatis, builders
must request an appraiser who specializes in green and should do so at the beginning of a project. If an
14 GreenBuilder July > August 2010
Where housing and the environment connect
John Freer—a consultant and president of Riverworks who built this house in Montana—notes that understanding how a green house is built will help it appraise. “If you are going to call yourself a green builder, you need to be a student of the building sciences. ... You have to get in depth in building science and learn how everything works and ties together,” he advises.
appraisal comes in lower than expected, builders should request a copy of it. “If it doesn’t talk about green or energy efficiency, you can appeal,” she says. Adomatis, who wrote the seminar, “Inspecting the Residential Green House,” suggests that builders who want a smooth appraisal process be prepared with the following: › A HERS rating. This is an estimate of the rating expected on completion. The appraisal should be subject to this estimated rating at or above the estimate. The HERS rating should include the Fannie Mae Energy Report that provides a contributory value of the monthly energy savings.
› Construction costs. The breakdown of additional costs relating to green and energy-efficient items.
› If building to LEED-H or NAHB’s National Green Building Standard, provide the rating expected. The appraisal should be subject to this rating at a minimum.
› Blueprints. These should be detailed with
attention to the energy efficient and green products noted.
› Detailed specs. Address energy efficiency and green construction products.
› Incentives. Provide a list of incentives that might include rebates from the power company, federal or state governments, lender, or local sources. The appraiser should address the incentives in the report.
› Local code information. Provide a table comparing the local building code to the subject product. This document is invaluable in documenting an appraisal to the lender and supporting potential additional costs in the cost approach. While this information will help you get
the full value for your homes, you need to explain green choices to your clients, so they will understand what adds value to a home. Adomatis points out that energy efficiency and in some places water efficiency are a plus in terms of cost versus value. But say your buyer wants a recycled countertop versus granite. If the green top costs double the granite, the appraiser is not going to
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