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Appraising High Performance Homes To Meet Today’s Energy Codes

Chicago area Realtor® Laura Reedy Stukel, delivers an inspiring Keynote presentation to 225 realtors, lenders, appraisers, builders, and home performance contractors from VT and NH at the Green Real Estate Symposium at the Lake Morey Resort in Fairlee, VT last October.

Chicago area Realtor® Laura Reedy Stukel, delivers an inspiring Keynote presentation to 225 realtors, lenders, appraisers, builders, and home performance contractors from VT and NH at the Green Real Estate Symposium at the Lake Morey Resort in Fairlee, VT last October.

By Jeffrey Gephart

Appraising High Performance Homes. I speak daily with Vermont builders, architects, home buyers, and do-it-yourselfers who are building new homes. Awareness is growing that net-zero-energy homes, homes that produce as much energy as they consume, are now attainable across all home types. Home performance contractors and owners of existing homes are making comfort, durability, indoor air quality, and energy efficiency improvements too. Newly constructed and renovated homes in Vermont and New Hampshire built to comply with todays energy codes are 33 to 40% more energy efficient than homes built to code a decade ago.

We can achieve comfort, durability, and super energy efficiency with certainty. What is not certain is whether these benefits will contribute real estate value.

Why? If an appraisal is required, market evidence that energy efficiency is valued must be documented. Im oversimplifying greatly; however, appraisers analyze the recent history of comparable home sales. If your net-zero-energy home is the first, where is the comparable sale? High performance homes are complex appraisal assignments.

  • High-performance homes have unique features compared to traditional homes.
  • Lack of data makes finding comparable home sales and supporting adjustments challenging.
  • Without knowledge of high performance home construction methods and their benefits to the owner, it is difficult for appraisers to appraise this specialized property type.

The Appraisal Institutes (AI) Valuation of Sustainable Buildings Professional Development Program and Registry1 provides appraisers with tools and knowledge. AIs Registries provide lenders a source of competent appraisers (six VT appraisers in the Residential and five in the Commercial Registry now, plus an appraiser in both NH Registries working in northeastern Vermont).

How should you document high performance homes or features for appraisal? Build new or weatherize existing homes with Efficiency Vermont2, NHSaves3, and partnering utility and state programs. You get expert guidance, potential for financial incentives, and important home performance documentation that a trained appraiser needs. That data should be entered on the AIs Residential Green and Energy Efficient Addendum4 (the “Addendum”).

The Addendum, a tool that enables builders or other parties to provide energy efficiency and renewable energy data to Realtors®, lenders, and appraisers. Homes engaged in new construction and weatherization programs through Efficiency Vermont, NH Saves, state weatherization agencies, utilities, and area non-profits have access to much of the energy data needed to populate the Addendum. The Addendum also provides notification of a complex appraisal assignment needing a competent appraiser.

Appraisal standards require that an appraiser must: be competent to perform the assignment; acquire the necessary competency to perform the assignment; or, decline or withdraw from the assignment (Fannie Mae, Freddie Mac, and FHA require that appraisers be competent or decline the assignment). Among other things, competency requires familiarity with a specific type of property.

Builders, brokers, agents, and sellers can talk with, provide documents, and accompany an appraiser on the inspection. Appraisers cannot be pressured to arrive at a value conclusion or to omit important facts by loan officers or others.

When scheduling an appraisal ask about the appraisers experience with high performance homes. If their competence is questionable–call the lender as they are the appraisers client. Challenges to an appraisal must be in writing, based on error of fact(s), omission(s), or inconsistencies, and addressed in a timely manner with the lender.

The Vermont Green Home Alliance (VGHA), a group of building, finance, appraisal, and real estate trade associations and businesses will be distributing a new publication from AI and the Building Codes Assistance Project. Contractors, appraisers, lenders, and Realtors®, look for Appraised Value & Energy Efficiency: Getting it Right5.

In late October, 2015, the VGHA with collaborators in NH held the Green Real Estate Symposium6: Appraising, Selling, and Financing Buildings with Energy Efficient and Renewable Energy Features attended by 225 Realtors®, appraisers, lenders, MLS, builders, and energy specialists. Attendees learned that our MLS serving VT and NH, the New England Real Estate Network, now has data on Home Energy Rating Scores and 3rd party verified building certifications (e.g., ENERGY STAR Home, Passive House, LEED for Homes, National Green Building Standard). Efficiency Vermont will soon pilot the Vermont Home Energy Profile to assist existing homeowners to voluntarily share energy information when they sell. The VGHA is seeking to enable automated population (electronic transfer) of high performance home information into our MLS, and to expand the continuing education opportunities and home performance knowledge of real estate professionals. The goal is market transformation, so that all can identify and accurately value energy efficiency and renewable energy benefits.

The author, Jeffrey Gephart, works with Efficiency Vermont and supports the VGHA.

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