Green home resale: appraisal requires trained eye

Michele Lerner | Improvement Center Columnist | September 6, 2013

When you add an extra bathroom or create living space from your attic, you would expect an appraiser as a matter of course to notice these features and include their value in your home appraisal. However, an appraiser can't see your new insulation or know at a glance that you have low-flow toilets and energy-efficient appliances. If you've spent thousands to turn your residence into a high performance home, you'll need to put some energy into getting an accurate appraisal.

Appraiser training

While green building has been around for more than two decades, not all appraisers have received training to recognize the value of various energy-efficient improvements. Appraisers are typically assigned by a buyer's lender, but when you or your listing agent are contacted for an appraisal appointment, you can ask whether the appraiser has been trained to evaluate high-performance homes. If not, you can contact the lender and request that they send someone who understands the value of green building.

As a homeowner, you should also prepare for an appraisal with a complete list of all the improvements you have made to your home, especially green features that may not be immediately apparent to an appraiser. If you have a relatively new home or have worked with an experienced green remodeler, you may have been given a list of the green features in your home that you can copy and provide to an appraiser.

These same materials should be provided to your listing agent to incorporate into your sales materials for prospective buyers.

Green addendum

The Appraisal Institute (AI), an association that represents appraisers, has addressed the problem of acknowledging the value of features such as energy efficient windows with the "Residential Green and Energy Efficient Addendum," an attachment to a standard appraisal form.

"Since its debut in September 2011, the AI Residential Green and Energy Efficient Addendum has proved to be extremely popular in the real estate industry," says Ken Chitester, a spokesman for AI. "More and more appraisers are completing the form as an optional addendum to the Fannie Mae Form 1004 form, which is the valuation profession's most widely used form for mortgage lending purposes. Many appraisers choose to use the addendum, but sellers, lenders and real estate agents also may encourage appraisers to do so."

Laura Stukel, a Realtor and energy-efficient expert in Elmhurst, Ill., wrote about the new version of the addendum introduced in March 2013 in a blog post in which she clarifies who can complete it -- "...whoever has the most first-hand knowledge with the performance and features of this home."

Builders, contractors, homeowners and third party green building experts are all allowed to complete the addendum and give it to the appraiser, the Realtors, lenders and homeowners. As a homeowner, you can fill out the form, or you can download a blank form and give it to the appraiser.

Your appraiser can use this information as part of the entire appraisal, so he or she would have to decide how to factor in your home improvements when determining your home's value.

Energy-efficient improvements and home appraisals

If you are uncertain about whether to invest your money in solar panels or a tankless water heater or a high-efficiency heat pump, you may want to hire an appraiser even before you make any home improvements, says Chitester.

"An appraiser can provide valuable information about which home improvement projects are likely to yield the greatest return on investment," says Chitester. "They also can appraise a property after improvements are made to help homeowners decide on a listing price."

AI maintains a list of qualified appraisers.

While the benefits of green home improvements go beyond your home price, you should make sure they are taken into consideration when your home is being appraised and when you place your home on the market.

About the Author

Michele Lerner, author of "HOMEBUYING: Tough Times, First Time, Any Time", has been writing about personal finance and real estate for more than two decades for a variety of publications and websites including The Washington Post, The Motley Fool, Investopedia, Insurance.com, HSH.com, SavingsAccount.com, National Real Estate Investor magazine, The Washington Times, Urban Land magazine, NAREIT's REIT magazine and numerous Realtor associations.