Are there lenders and appraisers who focus on green homes?
I recently had solar panels installed on our California home to boost the value to refinance. We got an appraisal from Wells Fargo, but the appraiser had no experience with solar panels, so the value was ridiculously low. Therefore, we need to find professionals (lenders and appraisers) who specialize in green technology so we receive appropriate value for our solar panels. Also, are there programs that help homeowners refinance by making their homes more efficient?
Your solar panels, as well as other energy-saving upgrades, add real value to your home.
- Your home appraisal should reflect an adjustment for energy-efficient upgrades like solar photovoltaics.
- Unfortunately, many appraisers and lenders have not yet learned what this value is or how to translate the value into a loan to the homeowner.
Way back in 1998 the Appraisal Journal printed a report titled "Evidence of Rational Market Valuations for Home Energy Efficiency." The report states: "If home buyers expect stable fuel prices, then the marginal value of energy efficiency in recent years should be $10–$25 for every dollar reduction in annual fuel bills."
I'll use my own building as an example. I have a multi-unit loft building with an 8 kW solar photovoltaic system. I'd estimate that saves roughly $5,000 per year in energy cost savings.
- $5,000 times 10 equals $50,000.
- $5,000 times 25 equals $125,000.
So based on this report an appraiser should add $50,000 to $125,000 to the value of my building because it is outfitted with this solar power system.
So here's what you can do:
- Educate your appraiser
- Talk to lenders that specialize in green properties
- Call a real estate agent who specializes in green homes and ask them for a local lender referral
1. Educate your appraiser.
Your appraiser wants to value your home correctly but may not have the tools to do so.
Tell them the Appraisal Institute offers a low-cost webinar ($25 for members) to learn all about properly valuing green homes. You can also give your appraiser a copy of the report I referenced above by following this link.
2. Talk to lenders that specialize in green properties.
They are better tuned into loan programs that may have extra benefits for green homes, and those lenders should know of good appraisers to contact. These lenders are also often aware of tax incentives for green homes and other ways for homeowners to save money with solar and energy-efficient upgrades.
I've referred many clients to Jeff Bricmont of GoGreen Lending. Jeff is constantly educating himself about energy-efficient green mortgages, home improvement loans for photovoltaic installations, and green-related purchase and refinance options.
3. Call a real estate agent who specializes in green homes and ask them for a local lender referral.
Green real estate agents are a great source of information for real estate related services and most of us are happy to provide referrals.
Good news is that more help is on the way.
There is a big green wave of information and resources coming to make things easier for homeowners like yourself.
Last year, organizations like the U.S. Green Building Council, the National Association of Realtors, and the Appraisal Institute teamed up and launched the Green MLS Tool Kit.
The president of the Appraisal Institute remarked, "With more data, appraisers will be able to perform more comparisons and analytical analyses and therefore present even more reliable valuations..." You can take a look at the tools and industry suggestions that this toolkit is providing at www.greenthemls.org.
Buyers, lenders, appraisers and real estate professionals are all learning more and more about green homes. The more they learn, the more they value the green improvements you've already invested.
For more information:
Read Rick Williams's Q&A "What are the best choices for solar finance, or an energy efficiency loan, now that PACE is unavailable?"