The Value of Energy Efficientcy

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Energy Efficient HomeThere is an assumption that an efficient home is a more valuable one. Certainly an efficient home is more appealing to buyers, but does that transfer dollar for dollar to the value of the home? When it comes to the appraisal, the answer might surprise you.

When appraising a property that has been upgraded to be more efficient whether from solar panels, energy efficient windows, or air conditioning units, it helps to have a few comparable properties that have sold in the area in recent months. However, that is not always the case. In many neighborhoods it is realistic and quite common that there may not be a comparable property with similar upgrades in the area. Often times, appraisers hands are forced to use non-upgraded comparable homes, which obviously would not include an improved sales price to reflect the efficiencies that were added.

All is not lost, however. Appraisers have created ways to produce concrete results that translate into value. There are sheets and addendums introduced in recent years that address and define value on photo-voltaic energy and many other energy saving features commonly found in homes. As energy efficient-improved homes grow to be a larger portion of the market, the comps will follow.

Energy efficient homes represent a larger portion of the market place each year, and as more homes enter the market place, there will be a natural adjustment of pricing. There will be a gap created in the pricing between traditional properties, and green properties. The appraisal institute has created a form to capture information on efficient and solar features of a home. It is called the Residential Green and Energy Efficient Addendum.

It’s somewhat of a viscous circle, actually. If your home is the first green home on your block, the comps used would not reflect the green value. Let’s say your neighbor incorporates the same exact green upgrades to his home a month later. Your home would be used as a comp, but because there weren’t proper green comps for your own home, your neighbor’s house wouldn’t reflect a green price improvement either, and so it goes.

So what do you think? What is the best way to measure these obvious improvements, without seeing comps for green homes?

For more information, visit www.MarylandAppraisal.com.

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