4 Steps to Getting an Accurate Appraisal Value for Your High-Performance Home

Are appraisals for your newly constructed high-performance homes consistently coming in lower than your contract prices, despite being above code? How can you get appraisals to accurately reflect the additional value on a high-performance home?

There’s not always a simple answer, but there are several steps builders and your customers can take to educate local appraisers, lenders and the general public about what makes your durable, energy-efficient, healthier home stand out from the competition.

Unlike high-end finishes they can feel and touch, buyers and appraisers can’t see what’s behind the walls. The four steps below can help you highlight these hidden benefits to achieve an accurate appraisal value for your build.

Step 1: Assess and potentially change how you market your homes and their high-performance features. Consider the following tactics to make the features and systems in your build stand out:

• Advertise features that make the home more comfortable, energy efficient and water efficient, and how these aspects help to lower utility bills. Need ideas? Check out the translator tool at Home Performance Counts – an initiative between the National Association of REALTORS’ and NAHB – which parses out language choices that are relatable to buyers;
• Educate the selling agent about the results of an Energy Rating Index (ERI), the Home Energy Rating System (HERS) score or Home Energy Score (HES);
• Teach your sales staff how to articulate what an ERI, HERS and/or HES rating is and what it means;
• Display the ERI, HERS or HES rating and potential expected energy savings at open houses. Include an infographic to demonstrate the anticipated energy-use breakdown (e.g., 40% space heating, 10 % space cooling, 15% water heating, etc.). Use handouts to explain how the home brings in fresh air, why specific materials were chosen to eliminate harmful sources of particulate matter, and what mold-prevention techniques were used; and
• Highlight any independently verified green home certification, such as the National Green Building Standard, prominently in your marketing materials by adding the badge to flyers and webpages, and explaining what the certification means in terms of better indoor air quality, lower toxin levels in the home, and an overall quieter and more comfortable living experience. Display and discuss the certification plaque during open houses as well.

Step 2: Educate your buyers on the importance of choosing a lender who is familiar with sustainably built homes. Local mortgage lenders who have a separate appraisal panel of trained professionals with experience valuing high-performance homes are critical to get the value your above-code home deserves. Your prospective buyers can encourage the lender to use an appraiser on the Appraisal Institute’s green registry.

If the lender is familiar with efficient homes, he or she is more likely to wrap the slightly higher cost of the home into the mortgage, allowing your customer to realize monthly energy savings that make any potentially higher upfront cost work out financially.

Step 3: Include the Residential Green and Energy Efficient Addendum in your sales contract to document the high-performance features behind the walls throughout the sales process. Fully documenting the systems you put in is imperative to help the appraiser understand the value inherent in your above-code home. Additionally, consider adding a paragraph in your sales contract to clearly outline that hiring a qualified appraisal is a requirement for buying your home.

Step 4: Interview the appraiser before making an appointment. Ask him or her about their appraisal experience, what ERI Scores and HERS ratings he or she has seen in the area, and what professional development courses he or she has taken on high-performance valuation. The Federal Housing Administration, the U.S. Department of Veterans Affairs, Fannie Mae and Freddie Mac all require that the appraiser has requisite knowledge prior to accepting the assignment, and the only way to enforce that is to ask about their knowledge and experience upfront.

A combination of the above steps can help you better educate your market. It won’t happen overnight, but putting in the effort upfront to educate your prospective buyers with new marketing materials, clearly document the high-performance features you’ve included, work with local lenders, and require qualified appraisers as a part of your sales contract are all immediate actionable steps to properly inform all involved parties about the value of your green home

To stay current on the high-performance residential building sector, with tips on water efficiency, energy efficiency, indoor air quality, and other building science strategies, follow NAHB’s Sustainability and Green Building efforts on Twitter.