Green your Lender?
Kenneth Harney pointed out in a March column in the Washington Post, an important fact about green building: green building construction and improvements do not result in changed appraisals or mortgage underwriting in the United States.
This seems strange, given the emphasis of sustainability modifications widely marketed, available and adopted by American homeowners.
There is an appraisal form called “Residential Green and Energy Efficient Addendum”; it is not widely used, but if you’re contemplating the sale of a house with improvements, it’s worth asking about. Here’s the link (including the misspelling):
For the moment, green improvements in houses are driven by social awareness and economic self-interest, rather than value enhancement for the home. Such motivations are meaningful and appropriate, but the future can be seen in the commercial real estate market. There, jurisdictions like the District of Columbia are requiring public disclosure of energy performance in commercial buildings, and private marketing firms like Co-Star have included energy data in property descriptions for some years. These measures have a direct effect on chargeable rents and property values. And they are driving green retrofit and new construction.
As codes like the International Energy Conservation Code, adopted in Montgomery County, the State of Maryland and many other jurisdictions nationally in 2012 mandate improvements in residential energy performance, home owners and the environment will benefit, but not by increases in property value appraisals.
By the way, don’t look for much information on green building at the newsstand – you’ll be hard put to find any widely available publications on the subject. The magazines available are focused on industry, builders, architects and designers. An exception is Home Energy – check it out at http//www.homeenergy.org.
So for now, energy economics and environmental awareness are the main drivers for green residential construction and improvements. But it’s only a matter of time until your banker will recognize their added value, and disclosure at sale may require performance reporting beyond a couple of last year’s utility bills.
– Ralph Bennett, Principal
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