Appraisals Go Green to Account for Energy Costs

October 31, 2011

Mortgage underwriters generally weigh several numbers when deciding whether a family can afford a new home. They look at income, of course, and tally up expenses in the form of a home’s property taxes, insurance premiums and monthly payments. There is one number they ignore: how much a household spends on its utilities, a figure that averages more than $2,000 a year in the U.S.

New bi-partisan legislation introduced in the senate will soon change that. Democratic Sen. Michael Bennet and Republican colleague Johnny Isakson introduced  the SAVE Act, a bill that would require lenders to account for these costs in their underwriting criteria.

The bill has enjoyed support from groups with varied interests, such as the Appraisal Institute and the U.S. Green Building Council, the organization that has created a green building standard called LEED which requires energy performance testing of any homes that are certified.

LEED Homes Cost of Ownership ReportIn addition to the SAVE act, the Appraisal Institute has released a form intended to help analyze values of energy-efficient home features. It is the first of its kind intended for appraisers’ use. While the addendum won’t guarantee that an appraiser will raise a property’s value by tens of thousands of dollars for energy-efficient upgrades, it should guarantee at a minimum that energy improvements will be taken into account based on value adjustments consistent with local market conditions. More importantly, appraisers using the new addendum should be better equipped to identify accurate, area-specific comparable sales. Learn more about the Appraisal Institute Green Addendum.

When coupled with local market data in the Midwest that shows the total cost of ownership savings from building green, it will be hard for an appraiser NOT to make adjustments to the value of green homes that meet LEED Certification, and perhaps even other green certifications that do not require energy performance testing.

For builders and developers looking to learn green, the USGBC Illinois chapter is offering a full-day workshop on Friday Nov. 11 at an affordable price of $199 for those that register before Nov 1.

About The Author

Read All Stories By Jason

Jason La Fleur is the Chair of the USGBC Illinois chapter's Residential Green Building Committee, and is a Project Manager for the Alliance for Environmental Sustainability. He is a member of the national US Green Building Council (USGBC) Education Committee, and assisted with creating the education standards for LEED AP continuing education. Jason is also the chair of the Education Committee for the Illinois Solar Energy Association, and an instructor for the organization. For six years, he developed courses for real estate appraisers and led the Appraisal Institute's Green Building Project Team, working with sustainability-minded real estate professionals. Additionally, he is actively involved in residential green building and the LEED for Homes program in the Chicago region. Jason holds a Master’s in Education from the University of Illinois, and has over ten years of project management and curriculum development experience. Further dedication to sustainability is demonstrated in his LEED Accredited Professional designation.

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