Broker Craig Foley renovated his Victorian-era Massachusetts home “down to the studs” to add everything from ductless mini splits to new windows, he said at the Real Property Valuation Forum on green appraisals during the 2023 REALTORS® Legislative Meetings in Washington, D.C. His objective: to keep the existing home competitive when it comes time to sell in a market that’s embracing higher energy efficiency building standards.
And he’s keeping documentation of all this work, including third-party certifications, because the eventual listing agent will need it.
Listing agents are the linchpin to ensuring sellers derive value from the energy-efficient and green features in their home, said Sandra Adomatis, 2023 president-elect of the Appraisal Institute, who also spoke during the session. That’s because appraisers rely on the information agents input into the MLS.
Too often, Adomatis said, appraisers don’t have a clear picture of any energy or green features in listings because the data is hidden in or excluded from the MLS.
“The first two lines of the public comments [in the listing] should highlight energy and green features,” she said. “Don’t waste the space on things like two-car garages, which are listed in the checkbox section of the listing form. And don’t hide green features in the private comments. The public needs to know what they’re paying more for.”
So how can agents, with homeowner input, enumerate green features? Besides filling out green fields in the MLS, Adomatis recommends using the Residential Green and Energy Efficient Addendum, a free downloadable form from the Appraisal institute in which you can detail “behind the walls” features. Make sure to attach that form to the MLS and sales contract and share it with the inspector, she added.
Also critical, stressed Foley, chief sustainability officer for LAER Realty Partners, if the home has high-performance features, demand the lender or AVM bring in a qualified appraiser. “If you’re not demanding one, you’re doing your seller a huge disservice,” he said. “Sellers who’ve invested in these improvements want them counted.”
Foley said he goes so far as to turn away appraisers who aren’t qualified. He also advises buyer’s agents to educate their buyers to ask for an appraiser who’s had training in evaluating high-performance home features.
Meanwhile, the green appraisal business is getting a boost from the housing finance agencies, Sean Murphy, credit policy risk analytics manager at Freddie Mac told attendees. Fannie Mae and Freddie Mac are working together to redesign their appraisal form because the energy efficiency information “doesn’t stand out” currently. Furthermore, under the new form, “appraisers will have to do some homework, which will encourage them to be much more accurate in their valuation,” Murphy said.
So when it comes time for Craig Foley to sell his 1890s Victorian, what documented story will he have to share with the appraiser? He’ll be able to show that he’s achieved $3,711 in energy savings per year.