A Solution for Appraisers--the Weak Link

"Money makes the world go 'round," goes the old saying, and it's certainly true in the world of residential energy efficiency.  Many worthy home House and dollar sign symbolsenergy upgrade projects are cancelled or put on hold because the owners feel they won't get their investment back if they should sell soon.  Likewise for new construction, many builders in the speculative home market feel forced to build to the lowest performance standard, because energy upgrades won't "appraise out."

Plainly put, the appraisers are not doing their job, which should be to give a valuation adjustment for each feature of the home that is either above- or below-average, as compared to recent comparable sales in the area.  Is it right for a house to receive additional value for granite countertops, glass mosaic tile and a whirlpool tub, but no additional value for a 95% efficient furnace, 19 SEER air conditioner and third-party verification to a high performance national certification?  Of course not, but that is the current state of affairs.  However, help is on the way......

Residential Green and Energy Efficient Addendum

The Appraisal Institute recently released a three-page form called the Residential Green and Energy Efficient Addendum to collect information about energy efficient and green features, such as insulation values, efficiencies of heating and air equipment, high peformance windows, geothermal heat pumps, ENERGY STAR qualification or a HERS Rating, etc.  The form is meant to be used by appraisers, lenders, home energy raters and builders.  The Appraisal Institute is encouraging Fannie Mae and Freddie Mac to use the form and even request it from appraisers.  This form should be extremely helpful by somewhat formalizing the process, and also by educating all of the stakeholders.

If Your House is Above-Average.......Say So!

Few people realize that they have a right to request that their lender assign an appraiser who is skilled and competent at performing valuation adjustments for energy efficiency features.  It is perfectly acceptable to provide documents and information to the lender or appraiser about features of your home that you think are above average.  It is the appraiser's job to verify that information, and give it an appropriate value.

While the appraisal industry may be getting a little pressure to change from above, it certainly won't hurt to apply some pressure from the grassroots.  For your next involvement in any aspect of a special, high performance home, remember to put the Residential Green and Energy Efficient Addendum in someone's hands, and say, "This house is above-average......price it that way!"

 

(originally posted on Home Energy Consultants Blog).

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Comment by Laura Reedy Stukel on October 20, 2011 at 8:59am

The Appraisal Institute has announced a webinar on their new Green & EE Addendum. The course is open to members and non-members.  It will be presented by Sandy Adomatis, a leader in the industry on green value, and a primary author of the form.  Don't miss!  And keep an eye out at the end of November on another webinar on the same topic from Efficiency First. 

Appraisal Institute Webinar on Green & EE Addendum

Comment by Sandra K. Adomatis, SRA on October 18, 2011 at 3:53pm

The AI Residential Green and Energy Addendum will be presented in an AI webinar Nov. 17 at 1:00 pm Eastern Time.  You can sign up by going to the AI website.  The webinar will provide the objectives for developing the addendum and an example of one completed. 

 

We've received a number of comments on the addendum and did receive reviews from a number of players prior to releasing the addendum.  The biggest criticism is on the air sealing side and I can understand  your concern.  However, it is difficult for an appraiser to check the sealing of the duct work or identify some of the items suggested that may be behind walls.  If the appraiser is provided with a report certifiying these things, they could comment on the feature and attach the certification.

The comment section at the end of each block is large to allow the discussion of things that are not itemized with a checkbox.  New products come on the market so quickly in this field, that we cannot possibly itemize them all. 

 

The solar section is large but I'm inspecting a house tomorrow with several arrays of panels.  The webinar will provide some insight on why so much information is sought in this section.  Solar Panels are a large ticket item and an area where analysis is difficult because limited market data is available. 

 

Thank you for your comments on the addendum and I hope you'll continue to work with us to improve the reporting of green and energy efficient features.

 

 

 

Comment by Laura Reedy Stukel on October 14, 2011 at 10:38am

Good news and bad news folks..."green" isn't trendy just for green's sake any more.  That creates an opportunity to promote energy efficiency and it's direct benefits of health, safety, comfort and utility bill savings.  Out with do it because "It's cool!"  In with I can prove how this can help you.

But can we prove it?  Appraisers don't prove it, they just confirm it.  

How do we prove it?  Contractors need to make the Addendum part of their SOP.  Whatever you've done for a client...jot some notes on the Addendum and pass it off to the homeowner.  If the checkbox you need isn't there, add the data points in the comments.  This is CRITICAL for any properties that will be resold or refinanced soon, and helps over the longer term even if people are going to live in these homes a few years before they resell.  

An appraisal is only as good as the information provided to or available to the appraisers.  Share it upfront and we can prove it down the road.  That's good for everyone! 

Comment by Gary Kahanak on October 13, 2011 at 2:18pm

Folks, these are all great remarks.  It's pretty clear that the AI form is a beta, and I would say we already have a lot of constructive suggestions.  If there are more out there, let's keep them coming.  If you get a chance to actually use the form, please share your experience with us.

@Leah Thayer, thanks for sharing your article on the AI form.  The extensiveness of the photovoltaics section seemed quite a bit overdone to me as well.  Personally, I'm all about the energy, so anything that describes performance enhancement features is a priority.  Features that impact health should also be high on the list, such as sealed ductwork, designed mechanical ventilation system, high MERV air filtration and low VOC interior finishes and components.  Other items such as bamboo floors I would place in the "warm green fuzzy" category and deem not as important, since it does not directly benefit the homeowner's monthly cash flow or health.

Comment by t hardy on October 13, 2011 at 1:38pm
With respect to Mike's comments that the Real Estate Industry being opposed to such a policy, at the risk of being the devil's advocate, perhaps we could  suggest that the industry in the future could be held liable for damages for selling an unrated house - on health issues as well as high energy usage?  
Comment by Lorenzo Wyatt on October 12, 2011 at 7:58pm

Couple of thoughts on the AI RGEEA form:

[+] Wouldn't it be better if the first category were "Energy Rating" or "HERS Information" or (at the basic minimum) "Energy Audit?" Then, the components (insulation, windows, lighting, appliances, etc.) that contribute to those ratings could be inventoried. Indeed, "solar" could become one of these components (not a category).

[+] Those relevant home performance reports then could be attached to the AI report as an appendix. (i.e., In CT, both the U.I. and CL&P utility companies have an Excel worksheet that calculates the impact of Home Energy Solutions "audit" measures and generates a PDF for customers.)

 

$0.02

Comment by Mike Gilluly on October 12, 2011 at 6:47pm

Thanks for posting this and great comments. Its been part of the discussion here in CT. Last year the Real Estate lobby was quick to oppose policy that would move towards building lableing, audit prior to time of sale & energy cost disclosure. This form is a great starting point... I'll be bringing it a local bank soon to continue our previous discussion and pick their brain.

 A few months back I conducted an audit at a home via  liheap energy assistance ... the owner, a "realtor" was clueless when I told her boiler was @ 75%. Both the Attic and Bsmt Insy were upside down &over 5000cfm @-50!

Comment by Leah Thayer on October 11, 2011 at 7:24am
Carl Seville and Michael Anschel gave a healthy critique of the form on this article last week. To some of your points, they generally see the form as a good start but with an overemphasis on what Carl calls "ego-bling" -- e.g. solar photovoltaics and tankless water heaters at the expense of air-sealing and a broader emphasis on construction methods.
Comment by Alexander Bell on October 10, 2011 at 8:55am

This form may be a start - the first section - the one that every home will use - insulation - is just a space to add confusion; a line asking for what type (with no differentiation between spray and board), then a space for R-value and then check boxes for location.   99.99% of homes have a different R-value in the walls than ceiling - so how does the single space help?  In most climate zones a combination of cavity and continuous is required, again this will be messy to show on the spaces given.  At best I would say this is a good effort, not ready for prime time.

Freddie Mac Form 70A was not great, but at least this insulation part was clear and useful.

Comment by Kent Mitchell on October 10, 2011 at 8:53am

The form is a great step.  We are promoting it and will likely contact local appraisers and offer some feedback or training...  Remrate also has a very simplified appraisal addendum that we have been promoting although few people understand it and are willing to use it.

A couple quick items we see that are lacking on the forms- Heat pump water heater option, HRV or ERV, & efficient ventilation system options. 

 

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