Rick Schwolsky

Editor in Chief
Ray Ng Rick Schwolsky Editor in Chief

Special energy-saving items should be recognized in the appraisal process. The appraiser should compare the energy-efficient features of the subject property to those of the comparable properties in the ‘sales comparison analysis’ grid to ensure that the overall contribution of these items is reflected in the market value of the subject property. (Source: Fannie Mae 2011 Selling Guide)

It’s been years since I had a good argument with an appraiser. So when I found myself engaged yet again a few weeks ago, making the case for my new 4.2-kW PV system, it felt frustratingly familiar. I’ve been arguing the value equation of energy improvements with appraisers since back in the 70s, when I was building super-insulated, passive solar, PV-powered homes that passed comfortably through Vermont winters on the BTUs generated by a large dog.

It was futile then, and apparently not much has changed. But then again, how can builders expect to win an argument against appraisers who see our world through a checklist, let alone a checklist and valuation system that hasn’t kept pace with our own progress as a value-oriented industry?

To be fair, appraisers are required to base their opinion of value on “comparable properties” found within a property’s market area, which stands as one of the greatest barriers still facing our industry to delivering high-performance homes into the mainstream.

Even if we can equip appraisers with the knowledge, inspire them with the urgency, and enlist them to join our green mission, they will still be required to find market comps that prove the added value of green homes and their features through comparative sales prices. And despite recent studies purporting higher sales volume and prices for green homes, verifiable local market data that appraisers can cite is sparse to non-existent. While some flexibilities exist, many appraisers are either unaware, too busy, or too lazy to explore them.

Appraisal industry leaders acknowledge the challenges and, although they may be late to the game, are taking their first steps to realign their standards. The Appraisal Foundation (AF), the congressionally authorized organization charged with establishing the industry’s standards for qualifications and practices, is working with the U.S. Department of Energy (DOE) to integrate a green building curriculum into the AF’s licensing and certification requirements and incorporate green building valuation measures into the appraisal reporting processes used by lenders.

More significantly, the AF and DOE partnership will explore ways to build a searchable database of sales that includes the types and costs of any green building improvements—a green MLS of sorts. Appraisers could use the database when determining the values to apply for green features. Early forms of such efforts are already showing up, like the Green REsource Council’s “Greening the MLS” initiative, as well as some local programs. But who knows when functional database resources will be available, and official changes in the appraisal standards and certifications probably won’t appear before 2015.

So for now, we’re passing on advice from industry pioneer Dave Porter, who has been the lone voice in the green appraisal wilderness for years: Request a competent appraiser certified for “complex assignments,” provide documents on the features and performance of your homes, and encourage appraisers to broaden their search for comps.