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Building Matters

The Real Estate Value of High-Performance Homes

Real estate and appraisal industries promote trainings and tools to help agents sell green homes for their rightful value, so why isn't it working?

Aaron Smith, left, outside his Minneapolis home with solar installer Alex Thelen. The solar panels on the roof behind him were overlooked in a recent real estate appraisal, prompting Smith to abandon plans for a refinance. Photo courtesy EEBA.

Earlier this year, Aaron Smith thought he’d take advantage of low interest rates to refinance his Minneapolis area home, confident that the solar array he’d put on his roof would get due credit in the required real estate appraisal. But Smith was in for an unpleasant surprise—the appraisal never mentioned the rooftop system.

Smith, the CEO of the Energy & Environmental Building Alliance, a 90,000-member organization that promotes high-performance and net-zero building, abandoned plans for the loan. He could have requested another appraiser, but by the time a new inspection could be lined up, the opportunity for a low-interest loan might have been gone, and the irony wasn’t lost on him.

“I had put 10.54 kW of solar on my rooftop, and it may well not have existed to my appraiser. I even handed the appraiser the Green Addendum and he didn’t use it,” Smith said, referring to an appraisal document he had filled out in advance. “I didn’t get credit for my solar, and when the rates were down to 2-point-whatever, I actually couldn’t refinance my house.”

It was a frustrating experience for the head of an organization that promotes high-performance buildings and recently created a training module to help real estate agents sell them more effectively. Challenges like these remain for builders and homeowners trying to get due credit for features that lower energy costs and make houses more comfortable and durable. At the same time, both the real estate and appraisal industries are taking steps to train workers so they can recognize high-performance building features and accurately account for them in sales pitches and appraisals.

“We offer training,” Smith said. “We know it’s needed in the marketplace. It’s key. If the Realtors and appraisers don’t know what they’re looking at, then…

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6 Comments

  1. Expert Member
    Armando Cobo | | #1

    Scott, I’m glad you are bringing this issue up. For many years, while teaching courses and making presentations around the country for folks in the building industry, I’ve been highly outspoken on this issue to no avail, and I’m sure there are a few comments I’ve made here on the GBA about this issue in the past as well.

    Unfortunately, the entire industry is to blame. The Appraisal institute needs to make mandatory the certification and usage of the Residential Green and Energy Efficient Addendum. I’ve asked several Appraisers why they are not certified, and their answer is “we are too busy now and don’t have time for it”.

    Lenders should require their Appraisers to get certified, and most don’t even know the program exist. I designed a lender’s ZER house a few years ago, and he couldn’t even find a certified Appraiser to do his own house. BTW, his home is in the Dallas-Fort Worth metroplex, the fastest growing housing area in the country, and it does not have a single certified Green Appraiser.

    Builders, both production and custom Builders, hardly ever list their projects in the MLS, even though there is a way to register their sold properties. Not only that, but most state’s contractor and licensing boards, and NAHB, don’t have minimum educational requirements for the industry and their members to get certified in green courses and high-performing houses. All Builders love to tout their “greenness” in their marketing, but few follow through with real actions.

    The real estate community is the same. Very few agents have the knowledge of their own certification program, and even less include the correct information in their MLS listings.

    State legislators can fix this issue as well, after all, their constituents should be the beneficiaries of a good system, but as we all know, the especial interests and industry lobbying stops all endeavors on the subject… and everyone pays the price. Sad but true!

    1. Allan C | | #3

      Yes it is sad and maybe I'm overly skeptical, but I don't see it changing anytime soon. Volume is so high, appraisals are put through an assembly line with basic adjustments made to "comps". Real estate agents focus on the "eye candy", hardwood floors, quartz counters, etc as that's what sells. Production and spec custom builders do the same. Home buyers are at fault as well as most focus on style over substance. Unfortunately a Wolf Professional range sells a house better than sealing penetrations and making it air tight.

      The unfortunate side effect is that those looking for green energy efficient houses will have a harder time financing them if they don't appraise properly.

    2. Robert Opaluch | | #4

      Builders can make claims about how energy efficient their product is, and they might even believe it themselves...but their claims are miseducating people. Just one example: The builder who built next door to me, advertised a new home for sale in MLS as having "incredible insulation." The R-values were code minimums. Write it off to sleazy dishonesty, but its leading naive consumers to think that code minimum insulation R-values are incredible or good enough.

      HERS ratings being part of real estate listings might lead realtors to learn more to explain that item when questioned about it, as well as giving buyers a useful index to consider in their decisions.

      Average utility bills vs. neighbors average bills is showing up in RI utility bill mailings every six months or so. If that could make it into realtor listings, it may have even more impact on sales than a more abstract efficiency index like HERS.

      Also helps that you and others are teaching courses and making presentations to educate the public and those in the building, real estate and appraisal industries. I've done a few adult ed courses myself, but it doesn't reach many people. And most of those taking the courses already were somewhat knowledgeable and interested in energy efficiency.

  2. Expert Member
    Malcolm Taylor | | #2

    The chances of the situation getting better is in large part due to people like Armando who has been loudly banging this drum for years. Hats off to him.

    1. Robert Opaluch | | #5

      Agree. Armando Cobo for US Secretary of Housing and Urban Development! ;-)

    2. Expert Member
      Armando Cobo | | #6

      You mean like HUD Dictatorship?... I like it! 😂

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