New Appraisal Guide Helps Boost Green Home Valuations

Filed in Codes and Standards, Environment, Housing Finance by on January 21, 2016 6 Comments

valuation guideHome builders and buyers know they’ll have to pony up extra cash for an energy-efficient home. But such an investment can show inconsistent returns when it comes time for the appraisal.

According to the U.S. Department of Energy, homes built to the 2012 or 2015 International Energy Conservation Code (IECC) are 15-16% more efficient than those built to the 2009 IECC or earlier. It only makes sense those homes should have a higher value.

Fannie Mae, Freddie Mac and FHA guidelines already require appraisers to consider the energy efficient features of the home, and if the market supports an adjustment in the appraised value, one must be made. But an average appraiser won’t take this into account if they aren’t made aware.

To address this variation across the industry, NAHB recently collaborated with the Building Codes Assistance Project (BCAP) and Appraisal Institute (AI) to create a guide for home builders, buyers and lenders for the valuation of homes built to today’s stricter energy codes. They can also be used as informational pieces in understanding the importance of hiring a proficient “green” appraiser and where to find them.

The guide, Appraised Value & Energy Efficiency: Getting It Right, provides important information for buyers, sellers and home builders. Energy efficiency can be overlooked in the appraisal process for a variety of reasons, but specially trained appraisers can assess the value of these features.

“Homes built to the 2012 or 2015 energy code are high-performing homes and their appraisals should reflect that. We hope this tool helps builders, buyers and lenders achieve accurate appraisals,” said NAHB Chairman Tom Woods.

Maureen Guttman, president of BCAP, agreed and said the tool simplifies and helps correct a market barrier to stronger energy codes.

The guide includes ways builders can help the buyer learn about the loan and appraisal process and help assure a competent appraiser is selected. It also provides information for lenders about hiring the right appraiser for the assignment.

One recommendation is to access the online list of qualified appraisers in the Appraisal Institute’s Valuation of Sustainable Buildings Professional Development Program Registry.

For additional information about green home appraisals, contact John Ritterpusch at 800-368-5242 x8325.

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Comments (6)

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  1. Al Cobb says:

    You lost me with the very first sentence. The notion that energy efficiency will always cost more is misguided. This myth perpetuated by the NAHB and there consistent fight against stronger energy codes is why they lost my membership.
    The Green Addendum is a powerful tool and I applaud the promotion of its use. However, the preferred intro to this piece would highlight the proven successes of building to a higher level of efficiency which has countless benefits including greater marketability, profitability, livability, and sustainability.
    Higher levels of efficiency don’t always cost more. They often cost less and deliver more for the builder and consumer.

    • NAHB Now says:

      Thank you–NAHB has worked hard to reach this milestone on behalf of our members, and non-member builders too will benefit from appraisals that reflect the cost savings associated with homes that are built to be mor energy efficient. Home buyers are willing to pay more for these improvements but only if they’ll see a payback within 10 years, our surveys show. This addendum should make those often more expensive options more palatable and pave the way for more energy efficiency increases, which are in everyone’s best interest.

  2. Jeff Gephart says:

    The URL link in this extremely important article is broken. Could this be rebroadcast with the correct link?

    Correct link:

    At this site you can download either a two or three page version (the three pager just puts the buyer and lender letters on separate sheets).

    Please note that the lender template can be modified and could reference (in addition to code – or instead of code if code isn’t very stringent) other 3rd party verified building ratings, scores, and certifications such as ICC 700 National Green Building Standard and/or ENERGY STAR Homes, etc.

  3. Nate Hertel says:

    “Fannie Mae, Freddie Mac and FHA guidelines already require appraisers to consider the energy efficient features of the home”

    Can you please source this for future reference?

    I am building third-party certified zero energy ready homes (DOE ZER, EPA ENERGY STAR certified) and getting pushback from realtors and closing attorneys about contract stipulations requiring an educated and competent appraiser. I find a lot fo claims that FHA requires this but never the actual manual ro code that specifies it.

    Thanks so much!

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