"Insights for the Valuation Professional from HERS July 30, 2018 10:30 am to 12:00 pm AI Connect - 2018
Today s Speakers Steve Baden, Executive Director of RESNET Sandy Adomatis, SRA, LEED Green Associate, NAR Green Designee CEO - Adomatis Appraisal Services
What is RESNET? An industry-based, not for profit organization founded in 1995 A national standards making body for building energy efficiency rating and certification systems in the USA (ANSI Accredited Standards Development Organization) Created and maintains the Mortgage Industry National Home Energy Rating System Standards Set the standards for certification of Home Energy Raters and Quality Assurance of HERS Ratings
What is the HERS Index?
The Concept of an Energy Rating HERS Rating Reference Home Rated Home Automatically generated by software Establishes baseline to compare rated home to Minimum requirements established in the 2006 IECC and Federal law Scores ~100 on HERS Index scale The as-built home Components entered by the Rater Each component that is more efficient than the reference home will reduce energy use and Index score in the rated home. Less efficient components will do the opposite.
Components of a HERS Rating Some of the components used in calculating a HERS Score All exterior walls (both above and below grade) Floors, ceilings and roofs Attics, foundations and crawlspaces Windows and doors Vents and ductwork HVAC system, water heating system, and your thermostat. Air leakage of the home Leakage in the heating and cooling distribution system
Does HERS Rating include occupants? One person per bedroom plus one 7
Popularity of HERS
Percentage of New Homes HERS Rated 22% of all new homes in 2016 were HERS Rated! Credit: Dave Roberts, NREL
Other Programs Use HERS National Programs Local/Regional Programs Utility Programs
How Our Industries Parallel AVM AEM Algorithms 11
HERS Confirmed Ratings are diagnostically tested onsite.
What does a typical HERS Rating Cost? 13
Sandy Adomatis, SRA, LEED Green Associate, NAR Green The RESNET Appraiser Portal Secured Portal URL: https://portal.resnet.us/ 14
The RESNET Appraiser Portal is a BIG Deal! 15
RESNET s Appraisal Portal Includes Confirmed Ratings Only 16
Differences in HERS Ratings Sampling Projected Confirmed Random Testing of a number of houses built by same builder. Rating based on plans and specifications preliminary not tested Diagnostically tested with blower door and duct blaster X X X A Sampling or Projected rating requires an extraordinary assumption in an appraisal report. Builders should provide a Projected Rating for mortgage lending work to allow appraisers to understand the energy efficiency. A Confirmed Rating cannot be done until the house is completed. 17
Projected or Sample HERS deserves an Extraordinary Assumption 18
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ERI is on Building Permit. 20
Essentially, the difference between an energy rating and energy audit is that an energy rating measures a home s energy performance as compared to other similar homes, while energy audits show homeowners where and how their homes are losing energy. Energy Audit versus an Energy Rating An energy rating will result in the home receiving a HERS Index (Home Energy Rating System) Score, which has been likened to a MPG (miles-per-gallon) sticker for homes. It gives homeowners, and prospective buyers, a good idea of what that home costs to run and how energy efficient it is. Energy audits identify a home s energy problems and provide the homeowner with cost-effective solutions to those problems.
Let s see how the savings change as the HERS Rating lowers! 22
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Fannie Mae and Freddie Mac Appendix D 27
5/1/2018 Guide Fannie Mae Selling Guidelines Market Reaction 28
https://portal.resnet.us/ 29
Comparable Sales Search
Sales Comparison Approach that meets Fannie Mae Guidelines and Appraisal Standards Copyright Adomatis Appraisal Service 2018 31
Comparable Sales Search By State By City By Zip Code By Address Do lower ratings produce higher value? 32
Filter Results Copyright Adomatis Appraisal 33 Service 2018
Results Market Reaction? Copyright Adomatis Appraisal Service 2018 34
View 35
So, what does the MLS show in this market? 36
Market Reaction Supported Punta Gorda, FL HERS Ratings 2013-April 2018 - Avg Rating Per Street Avg HERS Rating 80 70 60 50 40 30 20 58 65 61 60 63 58 61 57 69 57 58 59 59 68 64 51 61 64 61 10 0 37
Market Reaction Supported Avg HERS Rating 2013-April 2018 63 62 62 62 Avg HERS Rating 61 60 59 60 59 61 60 58 57 2013 2014 2015 2016 2017 2018 38
Market Reaction Supported? 39
MLS shows no HERS????? 200 shown in RESNET Appraisal Portal Avg HERS # of Year Rating Ratings 2013 60 9 2014 59 19 2015 61 55 2016 62 62 2017 60 55 Apr-18 62 3 Avg. 61 40 40
Now I have addresses to research These addresses give appraisers a place to start the sales search for not only comparable data but for Paired-data analysis. Pairing sales with differing HERS Ratings may provide direct market support for the value of the energy efficient features.
Paired-Data Analysis Sale A Sale B Sale Date 02/05/2018 12/25/2017 Sales Price $225,000 $235,000 Living Area 2,100 2,125 Bedrooms/baths 3/2.5 3/2.5 HERS Rating 65 45 Location Sunny Side Sunny Side Sale Price Difference $235,000-$225,000=$10,000 for 20 points difference in HERS Rating Note: For educational purposes only, not actual sales Copyright Adomatis Appraisal Service 2018 42
ENERGY STAR RESNET HERS Registry is only place to identify ENERGY STAR Certified Homes to answer: 1. Do they sell for more? 2. Do they experience fewer days on market? 3. Is new construction in your market seeing more ENERGY STAR homes? 43
Details of construction and energy features A Full HERS Report Provides Valuable Valuation Data like these Basis for comparing sales Data to develop an income approach to value using energy savings A third-party report that gives credibility to the term energy-efficient home.
MLS Listings and Builders Must Change their Advertising BRAND NEW CONSTRUCTION HOME MOVE IN READY!!! 4 bedrooms 2 ½ baths, Flooring Vinyl downstairs, Carpet upstairs, Kitchen island bar-top height, includes Range /oven, Fan Hood, Dishwasher, 2nd floor Laundry room, Extended vanity in Master Bath, standard tub shower in both baths. Covered porch in front, cul-de-sac lot, 2 car garage with door opener Home is complete and ready! Sample from MLS Listing 45
HERS 62 46
Attaching this to the MLS without populating HERS searchable field does not help. 47
Marketing May Influence Sales Price 48
MLS Listing that maximizes the energy features NOW COMPLETE! Walking distance to the town center w/a variety of shops & restaurants. This new, energy efficient home features an open floor plan, family room and 4th bedroom plus bath in basement, and 3 bedrooms and 2 full baths upstairs. This section allows rental income over the garage and this home features an 1BR apartment in the oversized 22'x24' garage. Beautiful hardwood flooring throughout main level, granite, stainless appliances and custom trim work. This home achieved a HERS score of 48 and includes high SEER mini -split HVAC as well as foam insulation and tankless water heater. Cost of ownership will be much lower than the average home. PEARL Certified Platinum Level. Source: MLS Listing Certification Attached and a JPG in MLS Photograph Gallery 5.4% Sales Price Premium 49
Definition of Market Value Source: Federal Register/Volume 55, Number 165/Friday, August 24 th, 1990/Rules and Regulations 50
Maximizing Marketing Include HERS in searchable field Attach HERS Report to MLS Insert HERS Certificate as a JPG in MLS photograph gallery Attach completed AI Residential Green & Energy Efficient Addendum Attach completed lender letter from Appraised Value & Energy Efficiency: Getting it Right brochure 51
Learn more about how to implement green into appraisals & marketing 52
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Guide Addresses Appraiser, Listing, & Lender Relevance for each section. Where does it go on the 1004? Why is it important? How can it be used in marketing? How can lender use in underwriting? 54
https://www.appraisalinstitute.org/education/yourcareer/professional-developmentprograms/#valuation%20of%20sustainable%20buildings Appraiser Education Opportunities 55
Copyright Adomatis Appraisal Service 2018 56
Thank you! Contact Info: Steve Baden Executive Director RESNET SBaden@resnet.us Contact Info: Sandy Adomatis, SRA, LEED Green Assoc., NAR Green Adomatis@Hotmail.com 57