Now that we have talked about how important communication is between agents and the consumers and the agents and the appraisers, let’s get into the meat and potatoes, as they say. As an appraiser, one must be able to understand and identify high performance home (HPH) features. As I eluded to in the first part of this series, green washing can be a real a problem in this space. It is easy to add a few “green” features and have an agent advertise a home as being an HPH.
HPH or “green” homes are not just about saving energy. To accomplish a truly HPH one must look at the “building as a whole” entity and not just the systems. Another way to look at it is a “cradle-to the grave” approach, or from design phase of the home through the razing of it and returning to a site. What many appraisers and consumers don’t see immediately with HPH is how much more comfortable they are to live in.
The US Environmental Protection Agency describes green building below:
green building. The practice of creating structures and using processes that are environmentally responsible and resource-efficient throughout a building’s life-cycle from siting to design, construction, operation, maintenance, renovation, and deconstruction. This practice expands and complements the classical building design concerns of economy, utility, durability, and comfort. Green building is also known as sustainable or high-performance building.
So, what goes into looking at an HPH? I am glad that you asked. Well, there are six elements[i]
- Water efficiency
- Energy efficiency
- Indoor air quality
- Operations and maintenance
We are going to dig into the first two elements in this article.
When I am contacted by builders or borrowers that want to maximize their values from creating an HPH, I spend some time discussing site orientation. It is important. Obviously the homesite will have a huge influence on the home. The site will dictate what can be built. Location of the site within a market is a big deal. Every site has pluses and minuses and from the concept of location, it can mean a long commute to the store or a short walk.
One of the tools that I use on my appraisals, and one that is available in many multiple listing systems (MLS) is walkscore.com. This metric will give you an idea of how “walkable” a location. It takes into consideration distance to important market locations such as the downtown area of an MSA or shopping and retail areas. The more “walkable” the property and the surrounding neighborhood are, the higher the score.
Site is not just about market area location, it is also about several other factors. An important one is site orientation. How a site is orientated, meaning how does it lie when considering north, south, east and west orientation can impact the building in significant ways. Considering where the southern exposure of a home lies will affect the way solar energy interacts with the property.
Orientation, done correctly, can take advantage of passive solar technology. It can also minimize the amount of light that impacts the home through windows. Solar radiation really does affect the indoor temperature, which mean sit can require more heating or cooling to accommodate too much or too little solar radiation. Orientation can also impact the availability of optimal solar PV system placement. If done right, the site will allow better incorporation to the southern exposure for solar panels.
Drainage of the site is also an important consideration. In areas that allow for cistern storage of rainwater this can help reduce the amount of water needed to water the lawn or other vegetation on the site. Having less impervious surfaces that allow natural absorption and usage of water can enhance the “greenness” of the site.
Normally, educated builders and consumers will recognize the importance of site orientation and location right away. It is important for appraisers to recognize it as well. Sometimes homeowners insist on placing the home in an odd orientation to maximize views. Depending on what market you are in a mountain view or bay-view premium may trump a truly beneficial southern exposure vantage. When both performance and view combat one another in a consumer’s mind, the appraiser must be aware and able to measure impact of the issue to the overall value of the home. With proper planning, there are usually acceptable compromises that can be incorporate din the design phase of the home.
This element directly impacts the consumer’s monthly budget and because of that, it can be measured directly. This element is more than low-volume toilets and installing low-flow faucet aerators. It, like all things, require careful planning. It also includes lessening the amount of water needed to water plants. This can include rain barrels, cisterns, and the like. There is also advantages to utilizing gray water; this is the waste water from the kitchen, tubs, washers, etc. Everything except water that has been exposed to sewage. As mentioned in the site planning portion, some local governments prohibit the use of rainwater. So as part of site planning, it may be necessary to choose to live someplace other than a rainwater restrictive location.
Some of the things that homeowners can do include the flowing items. With retrofitting, one of the big water savers is finding and fixing any leaks. Upgrading appliances to more efficient models. This includes dishwashers and clothes washers. Installing low flow faucets and toilets are another big water saver. Utilizing the correct plants for your locality is a game changer as well. The correct plants include using native species and other species that grow and live best in the climate where you are located. This prevents the need to do extra watering.
The recognition of site attributes is not overly difficult but can be troubling for appraisers that have never seen or know about some of things that we have discussed thus far. Water efficiency technology may be easier to see if components are properly labeled. When you are not sure, ask questions. The homeowners may be familiar with these types of improvements, as well as the agent or builder. The best that an appraiser can hope for is that the homeowner and/or agent are up to speed as to what is present in the site and home. Homeowners that built the home will most likely be pretty I enthusiastic to share, where as a homeowner that is the second, third or more homeowner after the build or retrofit may not be as aware of the features present.
What are some proactive ways to get more competent? Take some classes. The Appraisal Institute offers three classes in sustainable residential properties. The AI also offers a list of appraisers that completed the program at Appraisal Institute’s Residential Registry for Sustainable Buildings. Earth Advantage also offers a three-day class on sustainable homes. They also maintain a designation called the Accredited Green Appraiser (AGA). You can also affiliate with an appraiser that has experience in these types of homes.
We will get into some valuation methods in a later part of this series. There are several tools in the tool box for appraisers that will prove familiar to most of us. We will also discuss the very important Appraisal Institute Residential Green and Energy Efficient Addendum Form. Another important topic we will discuss are the various home certifications out there in the markets. Knowing what these are is extremely helpful.