Green Appraisal Trends for Real Estate Investors

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Almost half the year is over and some exciting green appraisal trends are emerging.  Here’s what’s going on:

Appraisers are realizing they need to address the value of green for the future of their business.  We’ve reached a tipping point of sellers/investors who have green features in their listings and the need to be able to quantify how to value it has never been higher. Currently one of the biggest topics of discussion in the appraisal community is green and more green educational programs are becoming available to appraisers.

Green investors also have more power now. A few years ago if you had a green home you were selling you had to convince the appraiser/buyer of the benefits.  It was a largely subjective conversation and you were at their mercy. Now you have more power.  (And for a short while longer-no competition-more on that in a later post).

If your assigned appraiser has no experience in green, you can request a new appraiser. We’re seeing this happen more and more. You can also request that the appraiser compare your green home to others in the market, not just the nearest comps.  This can be a huge boon to your values.  There are precedents for both of these as well.  That is key because appraisers can use these precedents to substantiate the value they arrive at on your home.

Another positive trend is that the data that appraisers can use is readily available and more mature.  For example, three years ago if you wanted to quantify the energy savings on installing a water heater blanket, good luck.  The data just didn’t exist.  Now it does and you can leverage it with your appraiser.

On a recent project in Phoenix an investor flipped a cookie-cutter short sale (sales price aprpox. $170K) into a green home.  He bought it, greened it up and then marketed it as a green home.  His results:

  1. He sold it for $5000 more based on his comps/business model.
  2. The average Days On Market in that neighborhood was 86 days.  He sold his in 29 days.
  3. The buyer’s appraiser gave him an additional $9000 in appraised value specifically due to the energy efficient upgrades in the home. Based on his notes in the appraisal report, the investor probably could have argued an even higher value but in this case he didn’t need it.

These trends are only going to continue to lean favorably towards green.  Currently, green is a benefit that garners a premium price/appraised value.  I can see a time in the not too distant future where green is the norm. When that happens non-green homes will appraise lower and sell at a discount.  I can’t predict the timing of this but I think it’s sooner than we all expect. It’s already starting to happen in commercial and with apartment buildings.  This could be huge for all of us…

About Author

I help real estate investors increase profits and property values through a variety of green strategies. I help clients find hidden rebates, tax incentives and credits to maximize returns on any property. www.JimSimcoe.com

6 Comments

  1. Hello Jim. My website deals with Real Estate as well and is also relatively new. My idea is to target every city in every state and then attain business so I can work with real estate companies. My site is actually a leads generator in fact. It’s been so hard to get it going and it’s even harder to get your site to be successful. I actually really admire the work that you put in to making biggerpockets work because I know what it takes…I work hard every day just to achieve a little. I will definitely keep up with your new articles! Thanks for the interesting read…keep rocking!

  2. Yeah right Jim! One way of increasing your good point is to find ways to lessen the risks. As an investor/businessman, you should always be profit oriented but still compassionate to your clients.

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