Will a house that is 'green certified' be a big deal for resale?
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Where I work appraisals give most of the weight on price per sq. feet. Constuction material is of only minor importance i.e here brick appraises the same as vinyl siding.
I would love to see some of those appraisal reports. Because there is a lot more to appraising a property than just the square footage.
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Is there one certifing body to declare a house "green"? Is it a tangable improvement? Bamboo floors over oak?
Yes there is a certifying body. The "improvement" is tangible due to savings in utilities and other benefits.
From HUD
Energy Efficient Mortgage Homeowner Guide - HUD
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THE ENERGY EFFICIENT MORTGAGE means comfort and savings. When you are buying, selling, refinancing, or remodeling your home, you can increase your comfort and actually save money by using the Energy Efficient Mortgage (EEM). It is easy to use, federally recognized, and can be applied to most home mortgages. EEMs provide the borrower with special benefits when purchasing a home that is energy efficient, or can be made efficient through the installation of energy-saving improvements.
Home owners with lower utility bills have more money in their pocket each month. They can afford to allocate a larger portion of their income to housing expenses. If you have more cash, why not buy a better, more comfortable home? There are two options with the Energy Efficient Mortgage.
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A HERS report is similar to a miles-per-gallon rating on a car. HERS are programs which provide evaluations of an individual home's energy-efficiency. A HERS report is prepared by a trained Energy Rater. Factors such as insulation, appliance efficiencies, window types, local climate, and utility rates are used to rate the home and calculate energy costs.
A HERS Report Includes:
Overall Rating Index of the house as it is
Recommended cost-effective energy upgradesEstimates of the cost, annual savings, and useful life of upgradesImproved Rating Index after the installation of recommended upgradesEstimated annual total energy cost for the existing home before and after upgrades.
A Rating Index is between 1 and 100. A lower index indicates greater efficiency. Cost-effective upgrades are those which will save more money through energy savings than they cost to install.
A HERS rating usually costs between $300 and $800. This could be paid for by the buyer, seller, lender, or real estate agent. Sometimes the cost of the rating may be financed as part of the mortgage. No matter how the rating is paid for, it is a very good investment because an EEM could save you or your buyer hundreds of dollars each year.
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Many homes qualify for energy upgrades. This home qualified for $4,816 in upgrades. With the EEM, lenders recognize the savings the upgrades will bring. Borrowers may use these potential savings like extra cash, and add the cost of upgrades into the mortgage, paying them off easily as part of the monthly mortgage payment. Once the upgrades are installed the potential savings turn into real savings.
Another EEM option is for the lender to allow higher qualifying ratios for borrowers who will occupy a property meeting certain standards for energy efficiency. When the home has been built or retrofitted in conformance with the International Energy Conservation Code (IECC) standards for 2000 or later, then the lender may "stretch" the borrower's qualifying ratios. A debt-to-income ratio "stretch" means that a larger percentage of the borrower's monthly income can be applied to the monthly mortgage payment. That means the buyer has more borrowing power based up on the same income.
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For a standard home without energy improvements:
Buyer's total monthly income $5,000
Maximum allowable monthly payment 29% debt-to-income ratio $1,450
Maximum mortgage at 90% of appraised home value $207,300
For an energy-efficient homes (2000 IECC)*:
Buyer's total monthly income $5,000
Maximum allowable monthly payment 33% debt-to-income ratio $1,650
Maximum mortgage at 90% of appraised home value $235,900
Added borrowing power due to the Energy Efficient Mortgage: $28,600
In all honesty, an appraiser who does not take into consideration energy savings elements and the contribution they make in energy savings is in violation of USPAP and in a few short years could easily lose their license to practice.
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Standards Rule 1-1
In developing a real property appraisal, an appraiser must:
(b) not commit a substantial error of omission or commission that significantly affects an appraisal; and
(c) not render appraisal services in a careless or negligent manner,
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Standards Rule 1-2
(e) identify the characteristics of the property that are relevant to the type and definition of value and intended use of the appraisal,
Including the Scope of Work Rule:
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An appraiser must gather and analyze information about those assignment elements that are necessary to properly identify the appraisal, appraisal review or appraisal consulting problem to be solved.
In short, we must identify those things that contribute to value. Failure to do so is a failure to properly represent the property.
In the example used by FHA, there is an overall savings per month of $61. Assuming energy cost inflation at 5% per year (and do you really think it will be that low?), then over the 30 year life of the loan, that will generate in excess of $50,000.
I suppose to many of you $50,000, especially over that long of a term, is insignificant. But that is a pretty hard number that must be considered.
I have heard a little bit about the HERS report in a "Green Building" continuing ed class last year. From the class it sounded like something that will be happening in the future. I don't think there are any providers in my area yet. I have never see it advertised.
You might check the USGBC.com website. GWS is a HERS rating service. (USGBC=United States Green Building Council; HERS=Home Energy Rating System)
HERS is the standard that is becoming the preeminent one. Energy Star is the rating of each individual component....water heaters, light bulbs, furnaces, TV's, radios, computers, etc, etc etc are energy star rated if they meet specific energy use requirements. Certifying a house as Energy Star means it has achieved enough HERS "points" that the Dept of Energy will accept it.
HERS not only verifies the energy savings, but deals with site development, house orientation, house design, things like permeable paving, utilization of recycled materials, utilization of local products (trucking in building materials long distance creates a larger carbon footprint than using locally generated materials). Needless to say the more Energy Star components the better the HERS rating........................
Thanks everyone for your opinions. This has been very educational! If anyone has any other comments, please share.
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