The Appraisal Foundation — an independent 501c3 organization authorized by Congress to set the standards and qualifications for real estate appraisers — is working with the U.S. Department of Energy to develop guidance for the valuation of green buildings and education materials for appraisers. John Brenan, director of appraisal issues for the Washington, D.C.-based foundation, discussed the importance of guidelines and standards for the valuation of green buildings (his comments are edited for length).
Q: If a homeowner adds energy-efficient features, how could that impact the appraisal process?
A: This is sometimes a real good opportunity for the homeowner to have a dialogue with the appraiser. Give as much information as possible for the appraiser to understand the impact of that particular amenity. Say, “This is the system. Here’s our electric bill that shows what we were paying and are paying now.” Armed with accurate information, the appraiser needs to try to discern what the market is paying for that feature.
Q: Should appraisers be more knowledgeable about green features?
A: Yes. Our Appraiser Qualifications Board — for Jan. 1, 2015 — has made learning about valuing green buildings an educational topic for appraisers coming into the business as well as a continuing education topic for existing appraisers as they renew their license. That’s one of the ways that we’re trying to bring the knowledge up. Probably the biggest way is the Appraisal Practices Board. It is charged with developing voluntary guidance to appraisers on recognized valuation methods and techniques. A big push is the valuation of green buildings. We are working with HUD and their green sustainability programs. We do think there’s work that needs to be done. We do think that appraisers are absolutely expected to understand what they are looking at.
Q: What’s a tip for homeowners considering adding an energy-efficient feature?
A: A homeowner can hire an appraiser individually (not in pursuit of a loan). If they are considering putting in a $75,000 solar panel system along with reclaiming water, they can very well hire an appraiser for an idea of what the home would be worth after it. They can get an idea of what the market reaction would be. It is a tool to make the decision.
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