A green addendum for every green appraisal

A homeowner looking to sell or refinance can now download the free Residential Green and Energy Efficient Addendum, provided by the Appraisal Institute (AI). The addendum requires an appraiser to acknowledge the green features present and to adjust the property’s value in accordance with current market conditions. It may be made part of an appraisal report for a property featuring any number of energy-efficient features such as solar panels, insulation or water-saving appliances.

The form also reinforces public policy encouraging homeowners to make their homes more energy-efficient. [For more information on government incentives for home energy-efficient improvements and installations, see the October 2010 first tuesday FARM letter, Home energy efficiency: save money by upgrading your property.]

first tuesday take: Yes, one more piece of paperwork, but this proposed green addendum is about a property’s amenities – a  particularly advantageous tool for Californian homeowners. We have higher utility costs relative to other states, thus energy-efficient features are a significant money saver for homeowners. Virtually everyone stands to gain – well, except the appraiser who has to prepare the form.

Note though, the appraisal industry actually has to implement this form in order for it to make a difference – and this is where brokers and agents step in. Brokers and agents representing owners selling or refinancing must request that appraisals include the form to present a record of the property’s energy-efficient features for evaluation and marketing purposes. [For more information on the increasingly larger role energy efficiency is playing in real estate, see the February 2011 first tuesday article, A property’s energy demands: an evolving factor in marketing.]

RE: “New addendum could help appraisers give credit for green features” from the LA Times