Appraisals – Green Housing Causes Confusion

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Appraisals – Green Housing Causes Confusion

The green housing projects are rising fast, but developers would like to see them mushroom faster. While they are moving forward very quickly, appraisals are not keeping in line with this quick growing industry. Envision you are going to build a standard $500,000 home. You decide that you want the house to be more environmentally friendly, therefore you ask your architect to design the new house so it utilizes the sunshine and you put in high quality insulations and solar panels. This will cost you some decent money, so let’s say the final charge goes up to $600,000.

Unfortunately this is not how your bank or mortgage appraiser values it. It doesn’t do a lot of good to solely add value based on cost, but the question is, How much will the market pay on resale?’ says David Snook, an appraiser and member of the real property committee on education for the American Society of Appraisers.

Let’s finish our illustration. Your bank or mortgage company will only approve a $550,000 appraisal. With a 20% down payment, you will have to save $160,000 in place of of $110,000. With a high-ratio mortgage 5% down payment, you will have to find $77,500 in place of $27,500. That’s certainly more than a little jump. This might force you to look at the cheapest green option, using older and cheaper technologies, or maybe you will write off the whole green idea of the project altogether.

Still, as a green professional I see green real estate do make a cost effective point whatever the price increase. Look at it this way, green real estate sell over 20% faster with an 8.5% increase on price, according to Green Work Realty report. Although green house technology is growing, if you are unlucky enough to get your property valued by an appraiser who has limited knowledge in this field, then your property will be undervalued.

Until appraisers get the knowledge, there is little that can be done. Although there is no standardization for environmental and energy performance at this time, I think that they will soon be on their way. Green property is not only about the environment, it’s also about money. Take buying a car – would you buy a vehicle without knowing how fuel efficient it is? So when look for your new property, it stands to reason the logical thing to do is find out how energy efficient the home is.


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Sean McCracken

As the OC Realtor I’ll help you find your special OC Coastal home at that special price. With my hand holding, I’ll take you through the buying process for the minimal amount of pain - Call Me @ 949-290-5317

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