The Appraisal Foundation is currently preparing two reports to assist appraisers in assessing green and high-performance residential and non-residential/income properties. Those will be posted here when completed. A companion document, also in preparation, will define considerations in defining the competency of an appraiser equipped to assess this class of properties.
Fannie Mae Documentation Aids
In particular sections B4-1.3-05, B5-3.3, B5-3.3-01, and Fannie Mae’s Mortgage Loans with Energy Improvement Features on Existing Properties (04/09/2013)
Property Condition Assessment (PCA) forms
This is a rather comprehensive assessment, done per an ASTM standards. Attention to green attributes varies.
Energy Audits
Energy audits span a range of complexity and rigor --- appraisers should clearly understand the audit sophistication level within context of the valuation assignment. Energy audits include ASHRAE Level I walk-throughs designed as quick assessments identifying major system challenges and potential cost savings opportunities. An ASHRAE Level II assessment is a comprehensive operational analysis including investment cost and energy savings from practical operational and capital improvement measures along with and health and safety recommendations. An ASTM Building Energy Performance Assessment is specifically designed to develop information about building energy use to support a real estate transaction. Appraisers should ask for and review all past and current energy audits with a high performance building valuation assignment.
Resources:
Metrics and Ratings
There is a wide variety of methods and tools to produce metrics and/or rate the performance of buildings. Among the tools for homes are Energy Star, LEED, RESNET, and the Home Energy Score for homes and LEED, Portfolio Manager, and EnergyIQ for non-residential buildings. We have listed these and many others on a separate tab.
Residential Green and Energy Efficient Addendum
Originally published in 2011, the Appraisal Institute released their update to the "Residential Green and Energy Efficient Addendum" in March of 2013. This addendum was developed to provide a standardization of data regarding high performance components not addressed on the standard appraisal residential form. The addendum is intended to be filled out by the homeowner, builder or retrofit contractor and documents the energy efficient and green components of the home. It covers the six major elements of green building, as well as energy/green certifications and energy label scores. The addendum can also be auto populated by a HERS energy rater as part of a home assessment report, providing additional supporting documentation to the homes energy efficiency. The addendum is provided to the appraiser to aid in accurately identifying and analyzing the high performance components of the home. It can be downloaded from the forms section in the major appraisal software programs, as well as from the Appraisal Institute and can be included in the appraisal report as a supporting document.
Relevance to the Appraiser:
The "Residential Green and Energy Efficient Addendum" provides the appraiser with a basic understanding of the elements of green building and some of the terminology used by the building industry. This information could aid the appraiser not familiar in valuing these types of properties to determine whether to accept or decline the appraisal assignment. The addendum provides the appraiser with detailed information on the homes high performance components. Many of which might not be readily visible during the appraisal inspection. This information could be useful in expanding the appraisers scope of work and assisting the appraiser in locating comparable properties. In areas where energy efficient or green home sales are limited, the appraiser may consider conventional - code built homes as comparables. Use of these comparable properties could possibly require adjustments to the market approach. Understanding the high performance components of the home should assist the appraiser in making those adjustment decisions, as well as aid in completing the cost or income approach. Detailed information on specific components provide the appraiser with data which can then be transferred to other green appraisal tools, such as the Sandia "PV Value" calculator, which estimates the present value of a photovoltaic system. The addendum also offers a good forum for the appraiser to organize all supporting data collected on the property and assisting in the process of writing the narrative comments needed to accurately value the high performance property.
Commercial Green and Energy Efficient Addendum
The Appraisal Institute’s Commercial Green and Energy Efficient Addendum, published in February of 2015, offers a communication tool that lenders can use as part of the scope of work. The addendum also assists investors in communicating the construction features of the property that impact income. Appraisers, builders, energy modelers, green certifiers, architects and investors should use the addendum even if a property is not certified green by a formal certifying organization but does possess green features. The water and energy efficient features are key to a higher net income and appraisers should take care to identify these features. The addendum can be completed in its entirety, or qualified individuals can use only the pages that apply. Appraisers are required to have sufficient knowledge of these features to review the addendum completed by others and deem it credible to meet Uniform Standards of Professional Appraisal Practice standards for work relied upon by others.
Cost Data Addendum for High Performance Homes
As a collaborative effort in 2012, the Northwest EnergyEfficiency Alliance (NEEA) and Social Environmental and Economic Consulting, LLC (SEEC,LLC) introduced the "Cost Data Addendum for High Performance Homes". This was in response to appraisers requests for credible incremental cost data for these types of properties. Version 2 of the addendum was released in 2013 to address additional high performance measures, including estimated energy and water savings. The addendum is intended to be filled out by the builder or retrofit contractor and provides the appraisal industry with local cost data that will more accurately reflect the true incremental construction costs for upgrading components from code to energy/water efficient . It covers major components in five key areas of green building, as well as provides the appraiser with information on energy/green certifications, energy label scores and local utility costs. The addendum provides the appraiser with cost data and energy/water savings specific to the property being appraised. It can be downloaded from the NEEA, SEEC, LLC or Northwest Energy Star's websites.
Relevance to the appraiser:
The "Cost Data Addendum for High-Performance Homes" provides the appraiser with both detailed information of the homes energy efficient and water conservation components, as well as firsthand knowledge of the additional costs to build the home. This information could assist the appraiser in determining the homes quality of construction and aid in accurately developing the cost approach. Understanding the differences between high performance components and those of a conventional-code built home should also assist the appraiser in locating appropriate comparable properties. The addendum includes both local utility costs and the neighborhood average utility costs. This information could assist the appraiser in determining a possible value for projected energy savings and water conservation. In areas where there are few comparables, this information could be useful in making adjustments decisions to the market approach. The details provided in the addendum should prove helpful to the appraiser in expanding both the scope of work and the narrative comments required when value these types of properties. The addendum should be included in the appraisal report as supporting documentation.
Solar Energy Valuation
Green Book Value tool
WaterSense
Further reading