Sunday, April 16, 2017

Going High Performance Can Raise the Appraisal

Appraisal Institute Issues Guidance on Valuing ‘Green’ Buildings

From an article in the Appraisal Institute dated 1/9/14


When valuing green buildings, real estate appraisers’ analysis must be supported by market data on the subject property that helps explain why it stands out from its conventional peers, according to guidance issued today by the Appraisal Institute and the Institute for Market Transformation.

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Seeking to assist owners who retrofit an existing building or build a new one with energy-efficient features, the two organizations issued “Green Building and Property Value A Primer For Building Owners and Developers.”

“As owners and developers enhance buildings with energy-efficient features, appraisers can help make the case for green appraisal value,” said Appraisal Institute President Ken P. Wilson, MAI, SRA.

According to the organization's guidance, because these buildings with energy-efficient features are different from traditional ones, owners have had to change not only how they design, build and market, but also how they approach financing and construction processes. Otherwise, owners may pay for green — with certifications, capital improvements and marketing — and not fully realize the expected market benefits.

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1 comment:

Harris Woodward said...

Arguably, the biggest challenge to penciling out the numbers on green building is getting the appraiser to properly assign value to the unique energy efficiency/green features.

For starters, you have to really nudge the bank to retain a Green Appraiser, and make them include this document: http://www.appraisalinstitute.org/assets/1/7/ai-residential-green-energy-effecient-addendum-2.pdf

Even though bankers are not allowed to cherry-pick the appraiser, the builder/design can request that a properly certified Green Appraiser be selected to ensure the full value of the home is accounted for.

The argument for the lender is the same as for the borrower/home owner: lower monthly utility bills reduce the risk of being unable to make the monthly mortgage payment.