While location, design, and price are a home buyer’s main considerations, surveys show that buyers rank energy efficiency as one of the most desirable features, and importantly, when there is sufficient energy savings – one they’re willing to pay more for. However, energy efficiency can be overlooked in the appraisal process for a variety of reasons, including a lack of access to quality data, underwriting impediments, and appraiser qualifications. Many appraisers may not be aware of the unique features of an energy efficient home. However, there are many specially-trained appraisers who are qualified to assess the value of these features that are often hidden behind the drywall. One way to know that a home is built energy efficiently is to know which energy code it was built to.
According to the U.S. Department of Energy, homes built to the 2012 or 2015 International Energy Conservation Code (IECC) are 15-16% more efficient than those built to the 2009 IECC or earlier. They will be more comfortable to live in and have lower monthly energy bills.
Fannie Mae, Freddie Mac and FHA guidelines require appraisers to consider the energy efficient features of the home, and if the market supports an adjustment in the appraised value, one must be made, but an average appraiser won’t take this into account if they aren’t aware of it.
A ready-made solution exists
Fannie Mae, Freddie Mac and FHA guidelines require lenders to choose competent appraisers who have the requisite knowledge required to perform a professional quality appraisal for the specific geographic location and particular property type. Appraisers who are specially trained on energy efficient / high-performing homes will analyze market trends relating to special energy-efficiency features. You can access a list of qualified appraisers at the Valuation of Sustainable Buildings Professional Development Program Registry.
What can builders do?
Builders can help the buyer assure a competent appraiser is selected by doing these things:
- Complete and provide buyers with the Residential Green and Energy Efficient Addendum form.
- Provide a copy of a complete Home Energy Rating System (HERS) report (if available).
- Prepare the buyer to notify the lender that they require a competent appraiser for this special type of construction; add your logo and provide a copy of the directions detailed below.
- Add your logo, the property address, and contact info to the sample letter below. Direct your buyer to give the letter (along with 1 and 2 above) to their lender.