How to Select & Market High Performance Features That Impact Appraisal Values

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How to Select & Market High Performance Features That Impact Appraisal Values JANUARY 20, 2016 10:00 11:00 AM Presenter(s): Scott

1 How to Select & Market High Performance Features That Impact Appraisal Values JANUARY 20, :00 11:00 AM Presenter(s): Scott Robinson, MAI, SRA, AI-GRS Appraisal Institute, Chicago Sandy Adomatis, SRA, LEED Green Associate Adomatis Appraisal Service, Punta Gorda, Florida 1

2 Session Description Choosing high performance features for a house is easy, but knowing how to choose the ones that bring value is more difficult. This session will focus on the more valuable high performance features that can be included in your homes, how to market them for effect and how to present them during the appraisal process so they are properly noted on the Appraisal Institute's Residential Green and Energy-Efficient Addendum. 2

3 Learning Outcomes Identify high performance features that have measurable value. Understand ways to market the value of high performance features included in your homes. Learn how to present high performance features in a more meaningful way for a credible appraisal. Compare and contrast green features in home to create a balance of what sells and what has high appraisal value. 3

American Institute of Architects (AIA) Continuing Professional Education Credit(s) earned on completion of this course will be reported to AIA CES for AIA members upon completion of the AIA/CES

4 American Institute of Architects (AIA) Continuing Professional Education Credit(s) earned on completion of this course will be reported to AIA CES for AIA members upon completion of the AIA/CES Session Participation Forms found in the back of this session room and online at Certificates of Completion for both AIA members and non-aia members are available upon request. This course is registered with AIA CES for continuing professional education. As such, it does not include content that may be deemed or construed to be an approval or endorsement by the AIA of any material of construction or any method or manner of handling, using, distributing, or dealing in any material or product. Questions related to specific materials, methods, and services will be addressed at the conclusion of this presentation. 4

5 Scott Robinson, MAI, SRA, AI-GRS 5

6 2015 Realtor.com list of 20 popular features most commonly mentioned in home listings 1. Fireplace 2. Wood floor 3. Carpet 4. Granite counters 5. Stainless steel appliances 6. Open floor plan 7. Walk-in closet 8. Formal dining room 9. Vaulted Ceiling 10. Open kitchen 11. Tile floor 12. Covered patio 13. Finished basement 14. Breakfast bar 15. French doors 16. Chef s kitchen 17. Crown molding 18. Central air 19. Separate shower 20. Garden tub 6

7 The top 20 list is not a barometer of trends but rather of adoption cycles Realtor.com analyst Javier Vivas: It is more about how long it takes a particular new feature to become prevalent. It s like car technology: first you see the cutting-edge stuff in luxury cars, then it spreads into the mainstream. 7

8 What s missing from the top 20 most commonly mentioned features list? 1. High Performance Mechanicals 2. Energy Efficient Home low utility bills 3. Good Indoor Air Quality 4. Green Certification 5. ENERGY STAR Certified Home 6. WaterSense Plus 7. Low-E Windows 8

9 Energy efficient behaviors are declining, according to What Utility Customers Want by the Shelton Group WHY? Source: Shelton Group, (2014), Energy Pulse

10 They want companies to Manufacture in the U.S. Limit the amount of waste they produce Eliminate toxins they are putting into their products Be responsible environmental stewards Conserve energy/use renewable energy Be socially responsible Make products that are energy and water efficient Create products with recycled content Source: Shelton Group. (2014) Eco Pulse

11 They want companies to do the heavy lifting so they can be guilt free while continuing their lives as usual Source: Shelton Group. (2014) Eco Pulse

12 Why are high performance features omitted from the top 20 list? They can t see them, but they expect them! 2016 Sandra K Adomatis, SRA 12

13 They want homes that are already energy-efficient They want to buy (already) energy-efficient homes (71%) They want to rent (already) energy-efficient apartments (58%) They do not want to do the energy improvements themselves-they want to make their home pretty They want the ability to control their home from their smart phone Source: Shelton Group, (2014), Energy Pulse

14 What does it sound like buyers want? Smart House that they control 14

15 A survey of 1,600 consumers report they are ready for smart homes 90% of consumers say security is one of the top reasons to purchase a smart home system 70% report excitement around the cost savings and related energy efficiency that comes from a smart home Source: 2015 State of the Smart Home, retrieved from 15

16 The new home competition Risk Differentiation Innovation Aging housing stock with: High utility bills Poor comfort Health risks Moisture problem risks Excessive bugs/pests Durability issues Obsolete technology 85% of homes sold

17 Residential Green and Energy Efficient Addendum Alerts lender property is special Recognize special features Credible value opinion Brag sheet 17

18 Residential Green and Energy Efficient Addendum Standardize the communication of residential high performance features Enhance current appraisal forms Provide a basis for the comparable sales search 18

A two-page resource especially designed for new homebuilders Identifies resources regarding the appraisal of your energy efficient home Provides a sample letter

19 A two-page resource especially designed for new homebuilders Identifies resources regarding the appraisal of your energy efficient home Provides a sample letter for lender Identifies your Bill of Rights in the appraisal process s/resources/appraisal_guidance_2pager_revis ed.pdf 19

20 Sandy Adomatis, SRA, LEED Green Associate 20

21 2015 Copyright Adomatis Appraisal Service 21

22 If I build it, will it appraise? You must price it to sell You must sell it for the price you know it is worth The sales must be made available for appraisers Keep it simple 22

23 NEWS FLASH!!! If you do not sell it for more than a code-built house, you are indicating it has no sales price premium no additional market value Copyright 2015 Sandra K. Adomatis, SRA, LEED Green Associate 23

24 Maybe you can t sell it for what it is worth because you are not sending the right message in advertising Slide compliments of Sam Rashkin, Dept. of Energy

25 So, what features will the market pay for

26 Study Results Sales Price Premium Mean 3.46% Sales Price Premium Median 2.91% 19 of 32 Pairs Support Sales Price Premium between 2% and 5% Structure Age Ranges years Avg. Days on Market HPH Sales 20 days 2015 Copyright Adomatis Appraisal Service Avg. Days on Market Non HPH Sales days

27 New appraiser-driven study Total 43 solar PV host-owned home sales sales Covering 6 states This work was supported by the Office of Energy Efficiency and Renewable Energy (Solar Energy Technologies Office) of the U.S. Department of Energy under Contract No. DE-AC02-05CH11231 Slide 27

28 Premiums are clearly evident across all states Average Per Watt Premium Note: Premiums apply to average 2012 sales. Sales today, and in other markets, would be based on their respective market characteristics. correlation of premium (in $) to size (in watts): 0.54 (p-value 0.000)

An empirical assessment of the value of green in residential real estate Data covers October 2008 through September 2013 in San Antonio, TX Green designation increases value

29 An empirical assessment of the value of green in residential real estate Data covers October 2008 through September 2013 in San Antonio, TX Green designation increases value by 1% Green features increase value by 2% Energy efficiency raises prices by 6% Appraisal Journal 2015 (Winter) by Anjelita Cadena, Ph.D., and Thomas A. Thomson, Ph.D. Slide 29

30 Appraiser-driven study Uses appraisal methodology Identifies challenges in obtaining energy data Reveals contributory value for green and EE features Sales price premiums of 0.8% to 8% By Lisa Desmarais, SRA Slide 30

Washington-Oregon-Idaho Study covered energy efficient and green features Shows 1.

32 How does the addition of high performance features impact property value? 32

33 How does the addition of high performance features impact property value? 33

34 International Energy Conservation Code (IECC) Changes from 2006 and forward IECC Year Percent of Change 2006 Base Year % % % Seems there is a trend here that cannot be ignored IECC Code requires a blower door test and a visual inspection 34

35 The studies show a trend The market will pay a premium for high performance features. They may not be able to name them all or see them but they expect them and will pay more to have them. Solar PV High efficient mechanicals appliances lighting Tight envelope 35

Granite Counters Fireplace Stainless Steel Appliances Wood

36 Keep it simple make it a package Smart Technology Energy Efficient Features Indoor Air Quality Security System Solar PV Granite Counters Fireplace Stainless Steel Appliances Wood Floors Smart Home Items Saves Money Hidden Value Bling that sells Eye Candy 36

37 Data flow possibilities Inspectors Lenders E.E. Services Data Repository Appraisers Real Estate Agents MLS 2015 Copyright Adomatis Appraisal Service 37

38 Complete the Addendum in appraiser language Completing the Addendum is key to a more accurate valuation Chapter 6 -green-valuation-tools/?f_sort=10 38

39 Steps forward to a more accurate valuation HERS Index and/or green rating Envelope rating Duct rating Insulation installation rating Date rated Name of rater 39

40 Steps forward to a more accurate valuation Complete the AI Residential Green and Energy Efficient Addendum and make sure the borrower, appraiser, lender and real estate agent has a copy 40

41 Document the hidden value Items that the appraiser needs: Complete HERS report that provides input for income Approach method (present value) Green rating and worksheets Complete cost breakdown Cost of additional energy or green features Sales of similar properties that are arms-length transfers AI Residential Green and Energy Efficient Addendum 41

42 ENERGY STAR 42

43 ENERGY STAR 43

44 Overcoming barriers 2-Page New Builder Resource Residential Green Valuation Tools AI Residential Green & Energy Efficient Addendum 2015 Copyright Adomatis Appraisal Service 44

Speaker contacts Scott Robinson, MAI, SRA, AI-GRS

LEED Green Associate Adomatis Appraisal Service

45 Speaker contacts Scott Robinson, MAI, SRA, AI-GRS Appraisal Institute Head Shot Sandy Adomatis, SRA, LEED Green Associate Adomatis Appraisal Service Appraisal Institute Chicago Salisbury, NC Punta Gorda, FL Twitter: 45

RESNET Conference. Scott Robinson, MAI, SRA, AI-GRS Sandy Adomatis, SRA, LEED Green Associate

RESNET Conference. Scott Robinson, MAI, SRA, AI-GRS Sandy Adomatis, SRA, LEED Green Associate RESNET Conference Scott Robinson, MAI, SRA, AI-GRS Sandy Adomatis, SRA, LEED Green Associate Communicating HERS to Appraisers and Real Estate Sales Agents March 2, 2016 10:30 am 12:00 noon 2 Scott Robinson,