Green Appraisals

by Joel Barkman

The continuing effort to provide recognition for the added value of energy-saving and other green features in homes will take another step forward around mid-summer when the Appraisal Institute is expected to add a green and energy addendum to its appraisal report form.

This is not the first time that I have addressed this issue and it likely will not be the last. In the fight to protect our most valuable assets our homes — it is critical that the building, real estate, lending, and appraisal industries are all on the same page.

In most cases our homes are a product of our life savings. They often represent the largest investment that most of us will ever make.

Quality-minded builders have been waging an uphill battle in recent years to convince the lending community to recognize the difference between homes that are just built to code and those that incorporate techniques, systems and products that can dramatically reduce maintenance and monthly utility costs, which represent a significant expense for home owners.

Sandra Adomatis, whose firm, Adomatis Appraisal Service, is located in Punta Gorda, Fla., announced the new Appraisal Institute addendum on May 3 during the National Association of Home Builders' (NAHB) National Green Building Conference & Expo.

Adomatis said she hopes the addendum will be adopted by the Federal Housing Administration, Fannie Mae and Freddie Mac.

"Builders can fill out [a form] ahead of time and give it to the appraiser," she said, who "can't always see what's behind your walls."

Adomatis confessed that she herself knew little about the attributes of green homes until she ran into a green builder whose home she was appraising who was kind enough to point out that she didn't know what she was doing.

She told him it was the first green home she had ever worked on, and that prompted the builder to provide a crash course in green housing, the start of her education on an increasingly important segment of the housing industry about which most appraisers still know next to nothing.

"Ask 10 appraisers and only one has ever seen a HERS report," she said, referring to the evaluation that a trained energy rater provides on the overall energy efficiency of an individual home. HERS is an acronym for Home Energy Rating System.

The Appraisal Institute, she said, has been stepping up efforts to make its members more knowledgeable through its Valuation of Sustainable Buildings Professional Development Program, which is conducted in the classroom and online and whose curriculum includes an introductory course and a course presenting case studies on residential green buildings, with a similar course on commercial buildings coming on line soon.

Some builders have been signing up for the instruction, she added, and more courses will be added as new technologies are developed.

I cannot overstress the importance of education, which is a core mission of the Northern Virginia Building Industry Association (NVBIA). Our local chapter in Fauquier County has been training industry professionals on the subject of high-performance homes for years now.

I strongly encourage our local lenders, appraisers, real estate professionals, and county officials to get involved with your local building industry association. Training seminars, workshops, and home tours are just a few of the opportunities that my team and I provide to the community and to you and your staffs at no cost.

Meanwhile there is much work to be done. The National Association of Realtors is making headway in an attempt to include green and energy savings attributes in the homes on Multiple Listing Services (MLS).

This would provide sales comps to show appraisers and lenders how green certifications and features can boost the value of green homes and to enable prospective buyers to more effectively search for the green and energy efficient homes they want.

On the lending front we know of one concept, embodied in legislation championed by Sen. Michael Benner (D-Colo.), that would correct a "blind spot" in current mortgage underwriting and home appraisal practices by adding expected energy costs to the principal, interest, taxes and insurance now entered into the equation when qualifying a buyer for a mortgage.

Properly valuating quality built homes is not a new issue. It's been ongoing from the time I built my first home over 22 years ago to today. Trying to get people to look at value versus square footage and pretty wrappers hasn't changed either. It takes time, it takes truth, and it takes trust, but in the end I think it will take the whole community.

Because all homes are NOT created equal — just "Ask a Builder".

As always e-mail your questions or comments to joel@goldenrulebuilders.com or write to "Ask a Builder" at P.O. box 294, Catlett, VA 20119.

Barkman is past president of the Fauquier Chapter of The Northern Virginia Building Industry Association.

Read Joel's column weekly in the