Are Green Features Being Valued Enough in List Prices?

February 20, 2019

Some green homes may be misvalued, a costly mistake to homeowners who may be leaving thousands of dollars behind, panelists said at a session on Tuesday at the 2019 Builder Show in Las Vegas. To make sure energy-efficient features are counted, collaboration among appraisers, lenders, builders, and real estate professionals is key, panelists said.

Real estate professionals on the panel urged home builders in the audience to involve them in the initial planning of their green properties to make sure energy-efficient features are well-documented and marketed and properly valued from the start.

A compact fluorescent lightbulb seen from above

zaccrain - Morguefile

Sandy Adomatis, an appraiser with Adomatis Appraisal Service in Punta Gorda, Fla., says studies from across the country have shown properties with green features sell for a premium of 2 to 5 percent more than comparable properties. Home buyers value such features as lower energy costs and improved air quality and show a willingness to pay more for them.

For homes with energy-efficient windows, insulation, rooftop solar panels, or other features, property owners may find getting a certification to document sustainability features to their advantage later on in selling. Homeowners can get the properties evaluated with a Home Energy Rating System rating, LEED certification, or the EPA’s WaterSense or Indoor airPLUS labels.

A HERS rating, for example, will define the home’s energy efficiency. “A HERS rating gives the appraiser numbers so they can quantify the energy savings and that can help them properly value the home,” Adomatis said. It may be time-consuming and costly up front in getting property’s rated or certified, “but do you want to spend $300 to $400 more or potentially lose $5,000 to $10,000 at the closing table because the appraiser couldn’t value the energy efficiency of the home?” Adomatis said.

Beyond the label, however, the documentation of sustainability features is key to get in the hands of lenders and appraisers. Real estate professionals can fill out the Appraisal Institute’s Residential Green and Energy Efficient Addendum, which is a form to document the home’s high-performance and sustainability factors. Also, they can market the features on the MLS. The National Association of REALTORS®’ Green REsource Council provides a Green MLS Tool Kit that assists with the inclusion of green data entry fields on multiple listing services.

The panelists at Tuesday’s session said real estate professionals should provide supporting information—such as the addendum and MLS marketing information—to the lender when an appraisal is to be done. The additional information can help justify to the lender that you need an appraiser trained in green features to value the property.

A key element to appraising high-performance buildings is ensuring that appraisers are provided with the relevant information detailing the energy-efficient features, Adomatis said.

“The average appraiser would not know how to value the green home features,” said Craig Foley, GREEN, a real estate professional with Laer Realty Partners and Sustainable Real Estate Consulting Services in Melrose, Mass. “It is critical to get a qualified appraiser to make sure the value is reflected in the home.” You can find appraisers who have gone through extra training to earn a Valuation of Sustainable Buildings certification at appraisalinstitute.org. Search the directory when your lender has assigned you an appraiser to make sure you received a qualified appraiser trained in factoring in green attributes, Foley said.

Case in point, James Mitchell, GREEN, a real estate professional and founder of RenewaBlue, a solar and efficiency consulting firm, teamed with home builders in the planning stages of L’Avenir in Fort Collins, Colo. He helped the builders buy the land for the project and worked with architects, builders, and energy raters to make sure the properties’ green attributes would be factored in. He used the Green and Energy Efficient addendum, which was provided to the lender for the construction loan and justified the need for an appraiser trained in valuing green features. He credits the extra information with helping to get the properties appraised for 5 percent more in value than comparable properties that did not have the green features.

“REALTORS® need to be working with builders from the construction loan process so that lenders understand the value,” Adomatis said. “We need to train more real estate professionals, appraisers, and lenders to understand the value too.”

NAR offers the GREEN designation, which provides education on what makes a home green and also guidance on how to best market such properties to home buyers.

“It’s important to tell the full story of a property and communicate the benefits,” Amanda Stinton, NAR’s director of leadership and sustainability, told the audience.“If it’s not communicated to the public, the value is lost.”