Read an interesting article today. Going Green is great and certainly important for our environment. Issue at hand is that appraisers aren’t recognizing the invested value. Why, mainly because there aren’t enough suitable homes out there to use as comps.
This particular buyer was interested in a home with numerous “green” features, to include passive solar, upgraded windows, and a tankless water heater. The dilemma -- their appraisal came in at a lower value than what they were contracted to pay for the home. Consequently, they were being asked to make up the difference in cash at close.
The article goes on to say - appraisers aren’t recognizing the value of the net green costs which [in addition to the appraisal concern] is affecting manufacturers’ marketability of the products. Builders are also complaining that it’s difficult, if not impossible, to get appraisers to recognize green’s worth. Why? Again, it all goes back to not enough comps [like homes of a similar type] to justify the increased value.
As one appraiser stated -- “Market value is based on a simple concept: How much would someone pay for a home with certain features/attributes in a specific location, based upon and as measured by recent sales of similar homes with the same or similar features in the same location. [Value] isn’t a matter of what some appraiser thinks, guesses, or what in theory the energy savings could possibly be. It is based upon what the market has been willing to pay for similar properties with similar improvements.”
After lengthy discussion, he concluded by proposing that federal regulators modify appraisal guidelines to [in essence] create an index establishing a range (in value) that an appraiser could use to adjust sales/values based upon what specific green (added value) features were in the home.
Sounds like a feasible approach to me… as we shift more towards a green conscious environment.
The article (by Lew Sichelman) posted April 2th, is titled: ”Good luck getting a ‘green’ home appraised as such -- With few comparables, appraisers struggle to account for earth-friendly features”. To read the article in its entirety click here.
