Apr 122017
 

Appraising Energy Efficient Home with Few Comps???

 

Appraising energy-efficient homes when there are so few comps and the properties are loaded with solar panels, tank-less water heaters, low E windows, geothermal heat pumps; it’s like lions and tigers and bears, oh my!

 

Both Fannie Mae and Freddie Mac require that an appraiser obtain competency to complete an appraisal PRIOR to accepting an appraisal assignment. They require “requisite knowledge.”

 

USPAP requires in appraiser to have the requisite knowledge prior to accepting an assignment and act competently during the assignment.

 

Fannie Mae’s Definition of an Energy Efficient Property:

An energy-efficient property is one that uses resource-effective design, materials, building systems, and site orientation to conserve nonrenewable fuels.

 

Energy Efficient Improvements

“An energy-efficient property is one that uses resource-effective design, materials, building systems, and site orientation to conserve nonrenewable fuels.” (Fannie Mae Selling Guide)

Special energy-saving items must be recognized in the appraisal process and noted on the appraisal report. For example, when completing an appraisal report (Form 1004), special energy-efficient items are addressed in the Improvements Section under the Additional Features Field. The nature of these items and their contribution to value will vary throughout the country because of climactic conditions, differences in utility costs, and overall market reaction to the cost of the feature. Some examples of special energy-efficient features may include, but are not limited to, energy efficient ratings or certifications, programmable thermostats, solar photovoltaic systems, low-e windows, insulated ducts, and tank-less water heaters.

“Solar panels that are leased from or owned by a third party under a power purchase agreement or other similar arrangement are to be considered personal property items and are not included in the appraised value of the property. See B2-3-04, Special Property Eligibility Considerations, for additional eligibility requirements for properties with solar panels.” (Fannie Mae Selling Guide).

 

What if you don’t have any comps? Can you still produce an appraisal that’s acceptable to the Secondary Mortgage Market?

 

The answer is absolutely yes, but you will have to develop a residential income approach and develop the cost approach. While you may not consider these reliable indicators of value for the typical owner occupied residential property; when it comes to energy-efficient homes, they provide the most accurate indicators of value. Consider this, a typical 3500 square-foot home has energy costs of $5000 per year. If an energy efficient home in the same community and the same amenities has energy costs of only $1000 a year is there a difference in value?

 

You bet there is! Learn how to develop appraisals that will be acceptable to the Secondary Mortgage Market, even when you don’t have comps!

 

Get the requisite competency to perform appraisals on energy-efficient homes and understand how to charge your clients for them by attending our online: “Appraising Energy-Efficient Residential Properties” asynchronous course. After you have successfully completed the course you will become listed on the Energy-Efficient Professionals Qualifications Registry (EEPQR) at no additional cost.

 

Good luck and do good work.

 

Rich