Real estate appraisers have a new form to analyze green home features
Real estate appraisers have an updated tool to analyze the values of energy efficient home features, which will help those features be reflected in the appraised value.
In March 2013 the Appraisal Institute released an updated version of the Residential Green and Energy Efficient Addendum as an optional addendum to Fannie Mae Form 1004, which is the valuation profession’s most widely used form for mortgage lending purposes. The Appraisal Institute originally issued the addendum in September 2011.
The Appraisal Institute’s updated addendum allows appraisers to identify and describe a home’s green features, from solar panels to energy-saving appliances. Form 1004 devotes limited attention to energy efficient features, so green data usually doesn’t appear in the appraisal report, or it is included in a lengthy narrative that often is ignored.
The Appraisal Institute has added new energy fields to its form to help appraisers gather information on green features, removed the two columns for solar photovoltaic energy sources to align with the number found in a typical residential house, and in their place included a description of solar water heating systems because they are more prevalent in the market than solar photovoltaic sources and vary widely in their characteristics.
The form also includes references to aid appraisers in completing the solar section and a glossary at the end of the addendum to assist the appraiser and other readers, such as lenders and consumers.
Used by Fannie Mae, Freddie Mac and the Federal Housing Administration, Form 1004 is completed by appraisers to uphold safe and sound lending. Currently, the contributory value of a home’s green features is rarely part of the equation.
“The Appraisal Institute updated its addendum to make it easier for appraisers, lenders and consumers to use and understand,” said Appraisal Institute President Richard L. Borges II, MAI, SRA. “The form also will make it easier for appraisers to determine whether recent home sales should be used as comparable sales and provide assistance for Realtors in populating MLS data fields with accurate green information.”
The updated addendum reflects input from the U.S. Green Building Council and the National Association of Home Builders.
The Appraisal Institute long has been the industry leader in green valuation.
In October 2011, the Appraisal Institute endorsed the federal Sensible Accounting to Value Energy (SAVE) Act, which would improve the mortgage underwriting process by ensuring energy costs are included. Sponsored by Sens. Michael Bennet, D-Colo., and Johnny Isakson, R-Ga., the SAVE Act would instruct federal loan agencies to assess a borrower’s expected energy costs when financing a house.
Download the Appraisal Institute’s five-page green addendum.
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Real estate appraisers have a new form to analyze green home features
