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Green Building News

Pending Bill Would Help Appraisers Value Energy Efficiency Features

A measure under consideration by the U.S. Senate could make it easier to borrow money for energy-efficient homes

Image Credit: Public domain

Real estate appraisals that don’t give enough credit for energy-efficiency measures are frequently lambasted by industry critics and homeowners who have trouble recouping the extra investment they’ve made. A bill in the U.S. Senate could change that.

The legislation is called the SAVE Act, for Sensible Accounting to Value Energy. It would require three big lending authorities — Fannie Mae, Freddie Mac, and the Federal Housing Administration — to take account of energy efficiency measures in their mortgage underwriting guidelines. According to The New York Times, a home buyer would have to submit a home-energy report for the accounting measures to kick in.

Appraisers currently don’t have an effective way of to account for energy-saving features, and mortgage underwriters may throw out any adjustments because they don’t understand them, The Times reported.

If the bill becomes law, it would require lenders to account for the value energy-efficiency measures, just as they now make adjustments for local property taxes and other factors. The result: borrowers might be eligible for bigger loans.

In an unrelated story, buyers of energy-efficient homes look like better credit risks than buyers of ordinary homes. Robert Sahadi of the Institute for Market Transformation, which supports the bill, said that a 10-year study ending in 2012 found that loan default risks are about one-third lower on Energy Star homes than they are on homes that don’t meet the standard, The Times reported.

The bill, S. 1106, was sponsored by Sen. Michael Bennet, D-Colo., and has been referred to committee.

One Comment

  1. Expert Member
    ARMANDO COBO | | #1

    EEMs have been around for decades...
    Fannie, Freddie, FHA and VA have offered EEMs for years (1980s??), but many lenders don’t have a clue, and Realtors and Builders do not bother to learn about them. Also, few large banks like BofA and Citibank have EEM programs of their own. The Appraisal Institute early this year presented their new EEM Addendum (See attached); it’s pretty fair.

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