Accurate appraisals are hard to get in green architecture and in cohousing. “How to Get an Accurate Appraisal for Your High-Performance Homes” in Probuilder (31 March 2021) is aimed toward helping appraisers understand the extra value of homes built to high sustainability and energy-efficient standards. Cohousing communities have the same problem with appraisals of sustainability features but also for the common house and other perks. Appraisers will say they can only look at comparables. Very few cohousing projects have another cohousing community down the street in which to find comparables. And the appraiser can’t see what is behind your walls.
The National Association of Home Builders (NAHB) suggests ways to explain to appraisers why this home is of higher value than is obvious. Homes that are built above code may not look any different than those with barely passable construction and accurate appraisals will most probably require some education of the professionals crucial to financing.
- Educate appraisers and lenders. Stress how much the energy-saving and water-efficient home lowers utility bills. Lower energy bills may be taken into consideration when approving the mortgage. Have information available on the Energy Rating Index (ERI), the Home Energy Rating System score, or the Home Energy Score (HES). Infographics are very effective.
- Explain the National Green Building Standards and why specific materials were chosen to eliminate or prevent off-gassing, toxins, and mold.
- Choose a lender who is familiar with sustainability and energy efficiency. Some mortgage lenders have an appraisal panel that is trained to evaluate these features. Consult the Appraisal Institute’s green registry to find one or suggest one to the bank.
- If you are hiring an appraiser interview them before making an appointment. Ask about what ERI scores and HERS ratings they have seen in the area. Any professional development studies on high-performance appraisals. The Federal Housing Administration, the U.S. Department of Veterans Affairs, Fannie Mae, and Freddie Mac require that the appraiser has the requisite knowledge. The only way to ensure that it is followed is to ask about their knowledge and experience up front.
Putting in the effort upfront to educate others about high-performance features will at least help the next person obtain an accurate appraisal by explaining their investment in not-so-obvious above-code features that add value.
NAHB’s Sustainability and Green Building tips on water and energy efficiency, indoor air quality, and other construction improvements are posted on Twitter.
Categories: Ownership & Financing