Despite all the interest in energy efficiency, the market provides little support for property owners who want to finance construction of new, energy-efficient properties or improvements to existing buildings. The new “green appraisal” movement is trying to change that, but it‘s going to take time and effort.
Until change works its way through the various industries, below is a list of what property owners can do to get appraisal recognition for their energy improvements, negotiate a better deal on their mortgage and pay off their loan faster.
- Give appraisers and lenders what they need. To do their job, they must have fully quantified data to address their risk and marketability criteria. They‘re not against giving you what you want, but the potential liability, and job loss risks are so great these days that they must be able to back up any claims. So work with them and get them the supporting information they need.
- Get a HERS rating (Home Energy Rating System) for your home. For more information on what this means to your home and your mortgage, if applicable, visit RESNET.com.
- Look for an appraiser with green credentials. Interview your prospective appraiser and make sure he/she has the skills and experience with building improvements relevant to your project. If the appraiser who receives the request is not green-oriented, you have the right to request another one who is. If more owners request green-certified professionals, more appraisers will be motivated to obtain their training.
- Quantify your reduced energy usage and lower operating costs. Include the cost outlay information and list equipment for your Improvements. Even more important, provide before and after utility bills (12 months historical data is optimal) showing the actual impact your improvements have made (or predicted savings). You can also request 12 months historical data from your utility company.
- Help the appraiser develop the comparables picture. Properties that are newly constructed or renovated by building owners are typically not listed anywhere. Finding recently sold properties that compare with an energy improved property can be an impossible task in most regions. So try to get utility cost data on neighboring or similar comparable properties he/she can use as a baseline.
- If borrowing, insist that your lender record your HERS rating on the MLS. If you did not close your property as a purchase or sale, your title company can also record the HERS rating with the county recorded documents. Appraisers also search the county records and could find the HERS Rating there, which would also help when searching for green homes.
The bottom line is that education, training and standardization will need to be developed and implemented in the appraisal, lending and real estate industry before this process is easy for property owners. It will likely take many years and, until it‘s in place, we can start now by documenting the right information to support higher property evaluations. Property owners and homeowner associations can do their part by insisting on green appraisals and lending practices where possible, and by writing their legislators and local officials to demand that more be done.