Going Green in 18337>Question Details

Edward D. Ni…, Real Estate Pro in Milford, PA

Why do most lenders not recognize "Green" price adjustments on Energy Efficient / Green Homes by Appraisers ?

Asked by Edward D. Nikles, Milford, PA Sun Mar 1, 2009

Some Lenders pretend to offer "Energy Efficient" Mortgages with expanded ratios for Energy Star & Green Homes ! However , these same lenders will not recognize the "Green" adjustments made by Appraisers vs. non-green & non-energy star homes ! It costs more to build Energy Star & Green ! The benefits are documented by HERS Raters & Green Verifiers and utility cost savings can be calculated by computer programs ! Yet another Green Paradox - we want you to build Green , but it just won't Appraise ! Wake up people ! There are very few Energy Star & Green comparables sold as Resales ! If we can't appraise the ones we build , then how are we supposed to build more ? Is Green only for the wealthy or high downpayment clients ? I hope not ! I'm looking for ideas - What do you think ? Keepin' it Green !

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9
Thanks for pointing out my Green Home Sales Report Laura. As far as appraisers are concerned you have to consider that one day they had to make the decision that brick was worth more than wood or vinyl siding. That day will come but it's crucial to get this data into your local mls. Once it is there you can start reporting on sales trends and in Atlanta the trends are very positive. Green Certified New Construction homes are selling in almost half the number of days for about 5% closer to list price. That is a really big deal to a builder who is carrying the costs of a loan, landscaping, staging bills, utilities, marketing etc... I had a Bank of America lender draw up the carrying costs just for the mortgage and on a $500,000 home the savings were $28,000 when you plugged in the numbers from my report. That's a big deal.

Carson Matthews
1 vote Thank Flag Link Mon Jun 22, 2009
Hi Ed:

Hang in there, Ed. The exact same thing was happening 25 years ago when I was building my log home. I've built many since then, still live in one, but it was next to impossible to get a construction loan up until about 10 years ago. After some time, one smart lender saw the opportunity to grab the nich and decided to go "log" only, buddied up with one of the log companies with that idea and away they went. The other lenders saw they were losing business and simply followed. I think smart lenders know they need a nich in their market, and I think one of the top ones will see they need to start the new trend of lending green very soon. In fact, I wouldn't doubt they're working on it as we write, just haven't gotten their numbers together in order to give it the go-ahead. Red Tape. Hope it's soon enough for you. Good Luck.
1 vote Thank Flag Link Sun Mar 1, 2009
Ed,

As a Realtor I am just getting into the Green development "trend". I certainly do not believe it is a trend by definition. It has been a growing buzz word in our neighborhood Northern Liberties and has taken root in areas of Fishtown as well as other parts of our city.

Your question, "Why do most lenders not recognize "Green"..." Well, I think in my Philadelphia real estate market it is because there are too few green homes and appraisers as well as consumers and realtors do not speak green.

You seem like a forward thinking guy. Pehaps we can stay in touch. I am interested in learning to speak more fluent green. Perhaps we can help influence our sphere of influence by sharing what we've learned.

I was speaking to a group of green developers the other day. They are trying to build low cost green homes. My contribution to our meeting was more about educating the consumer about the value of environmentally conscious homes. Most home buyers are fixated on the price of a home when they buy it and do not even take into consideration the cost of running that home. We have to show the consumer the cost benefit of green energy efficient homes and the more educated the consumer, the greater demands for their investment to be honored by our industry associates such as appraisers and insurance providers.

An educated consumer is a powerful tihing!
1 vote Thank Flag Link Sun Mar 1, 2009
At this point it is clear that, although appreciated, lenders to nor percieve "Green" price adjustments as contributing value factors.

We feel that, in time, this will change. In some arenas, change is very slow.
1 vote Thank Flag Link Sun Mar 1, 2009
Annette , I agree with you regarding providing cost savings on energy related systems , which should be easy to figure , if you have the home rated for Energy Star by a HERS rater . For example , the 1st home I built Energy Star had a HERS Rating of 48 (52% more efficient than a code built home ) and LP Gas & Electric costs are estimated to be $157.17 per month with a savings of $170.27 per month . The cost for all the Green/ Energy Star options was approx. $15,000.00 or $89.94 per month at 6% interest for 30 years . The net savings is $170.27 - $89.94 = $80.33 per month net , if financed . Many Green items don't have easily quantifiable monetary paybacks like Low V.O.C. paints & adhesives , Green Label Carpet , Rain Barrels , etc.. , so that is why some builders stutter when asked .
Carson , I agree with getting Green Data on the MLS ! My problem is I have only Certified Green Home for sale in the entire county --someone has to be the pioneer ! Also , I'm a custom homebuilder , so most Green / Energy Star Homes I build are for Clients & never go on MLS . Keepin' it Green !
0 votes Thank Flag Link Tue Jun 23, 2009
The trouble with GREEN SPEAK.
Ed, you are right, there is a lot of talk about going green, saving the planet and doing the right thing. Nice idea but I really don't care. Show me the money!

As I have called on FLA green builders and green community planners they are all engaged in green speak so they can entertain like minded green speakers. What I want are real numbers that support the suggested additonal value these homes possess so these values can be coveyed to a home buyer in terms that make a tangible difference in their lives....how much money will I save! FLA Green speak experts, in my opinion, use evasive treminolog to keep the consumer from obtaining the data they need or they are building a legal defense.

Here is what the consumer needs!
How much will this home save me monthly? Find a way to answer this question even if you need to ask prequailifying questions such as what do you live in today and what does this cost you monthly, how many in your family, get some lifestyle stuff. PUT A "GREEN SAVINGS" CALCULATOR ON YOUR WEB SITE!

I can calculate the utility cost of a typical 1970 home with 1500 SF. and adjust for the saving with double pane windows, and R35 ceiling insulation, wall insulation, thermal doors and awnings, and the appliances. I can even provide a real value based on home location and resident lifestyle. Don't get carried away with the exceptions, this is an example.
However, the FLA greeners I talk with here provide non-comparable information.

If you want my support in promoting the value of greeen homes....give me the data! Perhaps the truth is the data indicates a 35 year payback, and a 10 year life expectancy. I don't believe this is true, but when the needed data is obscured, the wise skeptic must assume the hidden to be true.

Give the folks who are working with home buyers and sellers the data they need. We are more than capable of showcasing these benefits and the tangible value they represent. Again, the ONLY information I am interested in is, what's the cost, when is the break even, what's the life expectancy! Simple questions that when not answered leaves the consumer with no alternative but to take the same position as the banks at this time...NO VALUE!
0 votes Thank Flag Link Wed Jun 10, 2009
Thanks Laura for the updates ! I know we are at the beginning stages of the "Green Revolution" , but it is a battle to get anything Appraised that's Green / Energy Star without comparables . Hopefully , as more Green Homes get built & sold the problem will resolve itself . Keepin' it Green !
0 votes Thank Flag Link Wed Jun 10, 2009
One promising trend is that more and more MLS databases are including green fields. When appraisers can slice and dice the data better they will be able to determine the value for green homes. NAR's green resource council website has some info on what's happening, but it seems to be limited to projects that include an NAR GREEN designee. http://www.greenresourcecouncil.org/greening_the_mls.cfm

To me, the most interesting project to-date is the one led by an EcoBroker agent in Atlanta. I'm actually surprised this has not gotten more attention. Here we have data that shows green homes are closing closer to their list price and in a lot less time! http://greentothescene.wordpress.com/2009/04/19/green-home-sales/

Kudos to Carson Matthews and his peers for geting the MLS fields in place, and then slicing the data so consumers, appraisers. builders and Realtors can all benefit from the information!

For those in the Chicago area, I'm part of a team working to bring access to the same sort of green sales data to our area. Stay tuned!
0 votes Thank Flag Link Tue Jun 9, 2009
Bj , thanks for the encouragement on Green Building ! I think the resale comparables are just working against us in these trying times ! Unfortunately , in the latest case I'm refering to , the Appraiser understands Green Building & even lives in a Green Home , but the lender wiped out the $19,000.00 Green / Energy Star adjustments he made on our subject home ! I'm a licensed Broker/ Appraiser myself & I have no answers !
The Somers , I definitely think Green / Energy Star Building is here to stay ! Energy costs will continue to skyrocket and we have to build more Energy Efficient Homes as our Natural Resources are finite ! Energy Costs on existing older housing stock will be come a larger % of overall expenses , which will have to be factored into the purchasing equation .
Bill , I realize change is slow , but the market is rapidly changing to Green Built Homes and the Lenders & Appraisers need to get on board NOW ! The Obama Administration talks the talk now they need to walk the walk and find solutions , if they really want builders building Green Homes ! Keepin' it Green !
0 votes Thank Flag Link Sun Mar 1, 2009
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