Efficiency First

Good news out there for green homeowners: there’s now a tool available to help describe the value of energy-saving features in the appraisal of their homes. The nation’s largest professional association of real estate appraisers , the Appraisal Institute, has published an addendum to Fannie Mae’s Form 1004. Form 1004 is the industry’s mostly widely used appraisal form for mortgage lending purposes. As it stands, the form does not focus on energy efficiency features of a house, such as solar panels, high-efficiency windows, or energy efficient appliances.  This means that homeowners are often frustrated by the fact that their green investments are not reflected in the value of their homes.

The three-page addendum is a step towards addressing the problem. It helps appraisers identify and describe the energy-saving aspects of green homes and any relevant green certifications. While there’s no guarantee that this will raise the value of the property, appraisers can now at least point out the energy efficient features of a home. Those with training in green valuations can convert monthly savings on utility bills into a specific value adjustment, taking into account local market housing prices.

Contractors can get involved to support home owner value. Contractors involved with energy efficiency upgrades have first-hand knowledge of the information appraisers are looking for on the addendum. They can help homeowners by providing details on information that could be added to the form when the homeowner wishes to refinance or resell the property.

As a best practice, contractors could provide homeowners with information specifically on insulation upgrades, energy audit results and other installed measures.  The comments fields in each section provides space to elaborate on check boxes or to add details that could influence value in your market or region which are not otherwise noted on the addendum.

The addendum is available here.