Boosting Appraisal Values on Green Homes
It’s football season (Go Pats!) and time to re-visit the topic of boosting appraisal values on green homes. In the past I’ve advocated using the Energy Star guidelines to boost appraisal values. After working with different appraisers over the US over the past 9 months, I found an easier way. Instead of throwing into double coverage, throw the easy pass and move the chains a la Tom Brady. (I will try to stop the football references now.)
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Let’s assume you’ve greened a recent project and have an appraiser coming by. You’ve done the water heater blanket, improved the duct-work, wall socket gaskets, etc, etc.
Here’s what to do to boost appraisal values of a green home:
1. Determine (through past bills or closest comps) what the average utility bills (water/gas/electric) for a similar home in the neighborhood would be annually. For examples sake, call this $200/month.
2. Calculate the projected annual utility bill savings for gas/electric/water in your project. Base your calculations on both national data from a recognized brand (Energy Star) and the local utility company. If Energy Star says that you’ll save 20% on water heating expenses by using a water heater blanket and your local water company says 17%, use the local company number. For examples sake, call this $600/annually.
3. Give these figures to your appraiser.
4. Recommend to the appraiser that they do their own independent research on what factor these annual savings equate to in terms of added value. As a general rule, multiplying the annual savings by a factor of 10-25 gives you the added value on your appraisal. There is precedent for this in several markets nationwide that the appraiser can research and leverage in their report. Remember that appraisers are gun-shy so you need to hold their hand during this process.
For example, a recent project in Arizona projected an annual utility savings of $601 based on the green upgrades completed. The appraiser did his research and assigned a factor of 15, thereby boosting the appraisal value by $9000. The investor could have appealed that factor but was happy with the $9000 boost.
All in all, this is a simple way to boost appraisal values on your projects. Also, if you’re an investor who invests in the same geographic area repeatedly, then you’ll only have to do step #2 once.
*On a personal note, my apologies for being gone the past few weeks. It’s great to be back!
Photo: Tim Fuller