Appraising Green/Energy Efficient Housing

Just a brief look at how appraisers determine the value of a feature, green or otherwise, when appraising a home.

The difficulty in appraising green building is the availability of comparable sales.  It is unusual to find comparable properties with the same green features as the subject.  Therefore, how do appraisers come up with an adjustment for the feature?

First we need to determine if the green product is market accepted.  Would a typical buyer be able to operate it?  This comes from knowing your market area.

I appraised a home in Amherst, NH back in ‘02, when values were increasing, high demand/short supply, and under 3 months marketing times (so much easier to do my job back then).  The house was a passive solar envelope home…a very simple way to heat your home for almost nothing.  There was a forced-warm air heat system fueled by solar, oil, or electric.  The control panel in the basement looked like a Nasa control station.  It was mind-boggling, certainly would confuse the average home-buyer.  This would not be market accepted.  Keep it simple.

Cost savings is the main way I figure out my energy efficient adjustment, but the cost savings is not always market equivalent for energy-efficient homes.  It is a way to justify the adjustment.   You can find good sources for cost savings on the web, or talk to green builders.

Every sub-market will be different.  An entry-level home would most likely not see much, if any, added value.

There is a great subdivision here in Milford, NH called Sunview Homes (great name).  The houses were all placed to take advantage of the sun.  Heating/cooling costs are minimal and they all had quilted window coverings.  Most agents in the area don’t market them as passive solar homes.  Is there value there?  If the buyer doesn’t know about the energy efficiency then they certainly will not pay more for it.  The biggest problem I have when I appraise these homes is finding documentation supporting they are passive solar.  I’ve researched the line of deeds since the properties were built and haven’t found anything.  Because of my interest/knowledge in green/energy efficient building, and my discussions with homeowners who purchased the homes when they were built…I know.

There is so much to discuss on this topic, green building is such an expansive topic.  This is only the beginning.

Google my favorites:  passive-solar, geo-thermal, envelope homes, or sustainable design.

Some great links:

http://www.pr-inside.com/earth-advantage-institute-addresses-disparity-r1296769.htm

http://www.greenhomebuilding.com/QandA/financial/appraising.htm

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1 Comment

Filed under Energy Efficient

One response to “Appraising Green/Energy Efficient Housing

  1. Pingback: Should Green Building Be Valued at 100% of Cost? « AppraiserJenn

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