Appraising Green Features in Residential Homes

Yesterday, RealtyTimes ran an article about a unique partnership between BP and Shea Homes. The joint initiative, called Victoria Gardens by Shea Homes, is part of the builder’s efforts to reducing the carbon footprint of its homes. The homes will have BP Solar Home Solutions systems installed and will reduce electricity consumption by 30-60 percent.

In Congress, legislation is pending that would require appraisers to consider energy efficient improvements in appraisals. HR 6078 requires the “consideration of any renewable energy sources, or energy-efficiency or energy-conserving improvements or features of, the property.” Appraisal standards would actually be revised within 6 months of passage.

The question is around valuation. Are green features something that should be specifically valued? Will this legislation effectively assign a value to something that might not have a value? We’re not sure if this is comparing apples to apples but some homes have swimming pools. To some, pools (particularly if in ground) make a home worth more. Others have no use for pools – maybe they spend all summer on their boat.

We would love to hear some thoughts on this from appraisers.

  1. Joe Traynor

    I think that we are going to see more demand for appraisers to more knowledgable about energy efficient real estate. The Appraisal Institute already has a class on this subject. I was teaching an appraisal class to a Realtor’s office this morning and each Realtor involved in sales with geo-thermal heating sources stated that buyer are prepared to pay a premium for this.

  2. I don’t think we need additional legislation for something we already do. Part of the appraisal process is to evaluate the improvements and adjust for how they impact value in our particular market. Appraiser courses regarding energy efficiency would probably be very popular.

  3. Lucia

    Appraisers have been required to address the market value of energy efficient features for at least 15 years. The most typical features in a home have been double paned windows, extra insulation, solar hot water heaters, and the value attributed to them in my market area has normally been the cost to install them.

  4. Charlene Beetz

    In this market where new construction is dormant and prices depreciating – the high cost of “green” i.e. geo-thermal cannot be recovered by the builders unless they have a cash strong buyer willing to pay more than appraisal to cover long term energy efficient savings. It appears we are caught between a rock & hard place. If my take on this is incorrect – someone please shed light.

  5. Don Read

    Appraisers already consider this information, one more example of writing new rules by people that don’t even know the existing rules. It is just like a pool, it depends on the local market. Less than ten years ago I saw most solar systems removed by the buyer after the sale. Now LEED and Energy Star housing in some of our market segments are selling for a real premium, while other price brackets people could care less. When the energy cost savings can be documented, buyers seem more willing to pay a premium. I see the most impact on values in commercial properties were energy costs impact the cash slow when the income stream is the predominate value indicator.

  6. Robert E. Williams

    I have been giving the Premier Homes with solar the additional value based on the cost of the upgrade as a buyer’s preference. The last time I talked to Premier Homes in Yuba City, they had negotiated the upgrade to “total solar” and it was down to $15,000 from $25,000 in Live Oak. That I thought was very, very reasonable. And, I have also considered other solar items; i.e. solar hot water, external solar hot water for a pool, etc. It really depends on the market, the comparables and was it a sales point for the realtor. How much did the realtor stress it and how much of an influence would/did it have on the buyer? There is a home here that is total solar and they sell excess electric to PG&E. Yea, there is value in solar. But, I also ran into one that the solar cost was $64,000. A typical buyer is not going to pay that; over-improvement perhaps similar to a pool and the owner flat-out paid to much. Of course you know there are tax breaks for solar too and government rebates for installing solar.

  7. Sylvia Timotijevic

    I believe we will see more and more sustainable building and renovating all over the country as more an more people are not only aware but actually care about the environment and their health
    I have a course that I have created and is awaiting approval in Illinois for CE. It is an introductory course with the tought of expanding to 2 day if I can get backing by a good Organization