Representing major headway in gaining fair appraisals for green homes, the Appraisal Institute has introduced a new form to help analyze values of energy-efficient home features.
The first of its kind, the three-page Residential Green and Energy Efficient Appraisal Addendum is intended to be used by appraisers and is designed to be attached as an optional addendum to Fannie Mae Form 1004, the appraisal industry’s most widely used form for lending purposes.
“This addendum is another example of how the Appraisal Institute is at the forefront of real estate valuation,” said Appraisal Institute President Joseph C. Magdziarz. “It will help the industry standardize the way residential energy-efficient features are analyzed and reported.”
NAHB has long advocated a better system for taking into account green home features during the home appraisal process.
Historically, there has not been a consistent process in place for the lending community to differentiate between homes that feature energy- and water-saving techniques, greater durability and other green aspects from homes that do not.
These features contribute to the value of a home because they can dramatically reduce monthly utility costs, which represent a significant expense for home owners.
The new addendum was designed to enable appraisers to better identify and classify green features, with a goal of establishing the most accurate assessment of the value of the homes that have them. Over time and as it becomes broadly used, the addendum is also expected to help establish the incremental value of specific features on a comparative basis.
“We hope this new form will be a big step toward establishing more accurate home valuations that recognize all of the key features of a home,” said Kevin Morrow, senior program manager of green building programs at NAHB.
“Green homes can offer significant cost savings to home owners over a comparable home built to code, so we are pleased that this new form will finally provide a vehicle to demonstrate some of these key differentiators,” he said.
The form allows users to report on energy-efficient items such as windows, appliances and insulation; to list any applicable energy ratings; and to note the home’s average utility costs — demonstrating any savings to the home owner.
Green features are also among the items included in the new form, most notably, in a section that allows users to indicate if the home has been certified to the National Green Building Standard.
Solar panels and site details such as house orientation and landscaping are also evaluated, in addition to the property’s walkability and proximity to public transportation.
The form also provides space to indicate if the home has qualified for any federal, state or local incentives.
“We are thrilled that certification to the National Green Building Standard is finally getting the recognition it deserves in the appraisal process,” said Michael Luzier, president of the NAHB Research Center.
“For a long time we’ve known that our third-party green certification conveys tangible, financial benefits to a home and its occupants,” Luzier said.“Specifically referencing this type of national certification in the valuation process finally provides a way for appraisers to recognize and benchmark that value.
“We also appreciate the fact that energy efficiency upgrades and certifications are captured separately from whole-house green certifications. Energy efficiency is only one portion of the green equation, so to get the true value of a green home necessitates it being appraised beyond just its energy attributes.”
Home owners, sellers, buyers, refinancers and realty agents don’t have to wait for an appraiser to use the new form.
They can download it at no cost and ask that it be made part of the appraisal submitted to the lender. This will also help ensure that the appraiser uses the best and most accurate comps available that include similar green features.
“We hope lenders, home builders, real estate agents and home owners will take advantage of this new tool,” Magdziarz said.
“Mortgage lenders who want to see energy features analyzed should request the green addendum to be included with Form 1004.
“We also encourage lenders to provide the green addendum to home owners so they can fill it out and provide it to their appraiser.
“If a new home is being appraised, home builders can use the addendum to provide data to appraisers. Real estate agents also can use the data to help populate the MLS.”
NAHB is currently evaluating the form for improvements and fine-tuning that may increase its usefulness for association members.
For more information, email Kevin Morrow, or call him at 800-368-5242 x8375.
(If you wish to have a copy of this form – please send a request to firstname.lastname@example.org)