Green building costs not always included in home appraisal
It isn't always easy to get green building costs appraised correctly when getting a home appraisal for a bank loan.
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"The appraisal industry needs to have well-accepted mechanisms with which to upgrade the values of energy-efficient properties, much like they do with granite countertops or hardwood floors or fireplaces," says Mark Nuzzolo, owner of Brookside Development in Woodbridge, Conn.Skip to next paragraph
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Education to address the issues
The Appraisal Institute, a nonprofit educational and professional organization whose members account for more than a quarter of the nation's 100,000 appraisers, is beginning to address the issues. It has developed several courses and seminars as well as a green certificate program for appraisers who want to qualify.
"You don't get this type of analysis when you're going through the normal education process to be certified at the state level," says Leslie Sellers, an appraiser in Knoxville, Tenn., and 2010 president of the Appraisal Institute. "In order to do this, you have to take additional education over and above that."
Appraisers don't set the market value of a property, they simply measure it, Mr. Sellers notes. If there's no market evidence that a solar water heater increases the value of a home in a certain area, then the appraiser isn't going to place any value on it.
That's especially true in a changing market such as the current one. "We often work with market data that is six months old," says Sellers.
The banking community may help create some of that needed, green-market data. Some banks have begun to offer $1,000 off closing costs for homes that qualify as energy efficient. The government-backed mortgage giant Fannie Mae is expected to announce a green incentive program with at least one large bank to encourage more homeowners to use part of their mortgages for energy-efficiency upgrades.
The Department of Energy and the Environmental Protection Agency's EnergyStar program have announced the expansion of a similar green mortgage program already operating in Colorado and Maine. It allows homeowners to invest in efficiency upgrades and pay for them during the life of the loan, the interest on which is also tax deductible.
"Green building is still in its infancy," says Mr. Nuzzolo. "Technological advances have radically changed – and are radically changing – the way we build houses. The banking and mortgage industries need to be educated. We all have to keep things moving forward."