Making Energy Efficient Upgrades Visible in Home Appraisals Shaun Hassel Advanced Energy shassel@advancedenergy.org 503-477-0469
What percentage of the nation s total energy consumption is consumed by buildings? 40%
RESIDENTIAL ENERGY CONSUMPTION SURVEY (RECS)
Electricity accounts for 61% of all energy consumed in commercial buildings
Agenda Introductions & Background Common Language National and Regional Efforts to Make Green Features Visible in the Real Estate Transaction Demonstrate how to identify energy efficient upgrades and better document these features Resources for Appraisers
Thanks for being here. Your role: Have fun! Participate Be honest Don t be afraid to ask questions!
Thanks to :
Introductions By a show of hands: Western Washington? Central/Eastern Washington? Primarily residential? Primarily commercial?
Introductions By a show of hands: Have you ever appraised an energy efficient or green building? Have you every had a specific request to complete an energy efficient or green appraisal? Do you maintain a green appraiser designation? Appraisal Institute Earth Advantage Green Valuation Specialist
Introductions Shaun Hassel Advanced Energy Trainer and Consultant shassel@advancedenergy.org 503-477-0469
Common Language Green Building High Performance Building Energy Efficiency Third Party Professional HERS Rater LEED AP HERS Index HERS Score
What is a green building? 15
What is a green building? Environmental Protection Agency s (EPA) Definition: Green Building: A practice that expands and complements classic building design concerns of economy, utility, durability, and comfort. * *EPA at: www.ep.gov/greenbilding/pubs/about/htm 16
Elements of Green Building Site Water Energy Indoor Air Quality Materials Operations and Maintenance Valuing Green Homes, Appraiser Institute, 2009 17
High Performance Defined Healthy Safe Durable Comfortable Energy Efficient Environmentally Responsible
Energy Efficiency Defined INTRODUCTION Energy efficiency, in its simplest form, means doing more work with less effort. An energy-efficient home does the same job as a standard home in your market while using less energy.
Home Energy Rater (HERS Rater) Duct blaster test measures the leakiness of ducts Blower door test measures air leakage in the building envelope
LEED Accredited Professional
HERS Index In the first half of 2016, the average HERS Score improved to 61. 22
Questions
What is this stuff worth?
Electric Utility Investments in Energy Efficiency (2014) State Total $ s % of Electricity Revenues Washington $280 million 4.2% Oregon $160 million 3.9% Idaho $32 million 1.7% Montana $16 million 1.3%
Customer Advocates Satisfaction is a feeling, loyalty is a behavior
Desired Outcomes Prioritize training and job resources to assist stakeholders in selling, assessing and financing energy efficient homes, products and real estate services. Identify strategies for stimulating demand for energy-efficient homes, products, and services in the Northwest through partnerships with the real estate community.
Win-win Opportunities for the Real Estate Market
Clear & Reliable Metrics
Value Proposition
Price Premium Sale/Rental Price $ Time on Market
National Initiatives & Research Home Energy Information Accelerator
2011 N.C. Impact Study Summary http://ncenergystar.org/whats-new/3081 ENERGY STAR: Sold for ~$3.00/ sq. ft. more Achieved a 2.5% price premium 39
2011 N.C. Impact Study Summary Spent 90 fewer days on the market http://ncenergystar.org/whats-new/3081 40
Energy Savings for a 1906 Mixed Use Commercial Building Retrofit (Wilmington, NC)
Regional Initiatives & Research
PRICE PREMIUMS OF THIRD PARTY CERTIFIED HOMES IN KING COUNTY WASHINGTON Geographic Area Certification Mean Premium ($) Mean Premium (%) Statistically significant? King County All Areas ENERGY STAR $25,276 6.3% Yes King County All Areas Built Green $19,192 4.7% Yes
Tools & Resources
Questions
APPRAISERS WIIFM? Green education and certifications differentiate you from other appraisers Staying up to date on trends is important if you want to be a market leader/expert Certifications, HERS Ratings and green features (if on MLS) will help provide valuable information and become a time saver Energy efficiency is an added component that can be used comparatively with other homes
APPRAISERS -- Obstacles Often don t know when we are looking at a green or energy efficient building because: No one tells us it is different! The data isn t in the MLS No documentation is provided on site There are no labels Too many shades of green and too much variances within each standard Lack of a reliable method to value energyefficient or green homes
APPRAISERS -- Obstacles Challenging to find comps; currently combining approaches (income, sales and cost) is not really happening in residential Much of the problem is outside major metro areas where there aren t incentives for builders to build green or enough demand to justify the investment Leased solar PV systems are causing problems for valuation of the property
APPRAISERS - NEEDS Market demand for green needs to catch up to the construction market; especially owners of existing buildings Listing agents and building owners need to put upgrade details in the MLS Lenders need to ask for specific appraisals, pay the appropriate fees and someone needs to provide documented data Standardization of metrics, especially for certifications and energy (look to Europe s Energy Performance Certification mandate)
APPRAISERS - NEEDS Property management companies need to provide utility data on rental properties (Europe has managed this over 12 countries) Need a trusted approach to translate the HERS score to $ value More research showing the value of the buildings over time, across markets Information on PV production of energy would be helpful
APPRAISERS - NEEDS Appraisers need education on green features and how to properly assess the added value Builders and listing agents need training on how to fill out the green fields and addendums
Buyer/Lender Perspective The use of an appraiser who has access to the appropriate data sources, and experience in appraising specific property types will help to ensure that valuations are accurate and that appraisal practices are appropriate.* *from Fannie Mae s selling guide, spring 2010 update 53
Buyer/Lender Perspective appraisers must have the requisite knowledge to perform a professional quality appraisal for particular property types. * *from Fannie Mae s selling guide, spring 2010 update 54
How will we identify and assign appropriate value to energy efficient features? 1.Things you can see 2.Certifications and labels 3.Scoring tools 4.Multiple Listing Service (MLS) 5.Educated appraisers
Energy Efficient Features 56
What is Effective Insulation? 57
ENERGY STAR Labeled Windows 58
Tight Construction and Ducts 59
Efficient Hot Water Systems FEATURES & BENEFITS Conventional Tankless Hybrid Solar Hot Water
High Performance Heating, Cooling and Ventilation Costs less to operate More quiet than standard systems Higher quality components Improved comfort
Energy Efficient Appliances and Lighting Lighting Bulbs last 6-10 times longer Use 75% less energy Appliances Use 10-50% less water & energy NorthwestENERGYSTAR.com 62
3 rd Party Certifications Training and diagnostic equipment allow a third-party professional to confirm performance targets and verify building details meet standards
1234 Jones Road Anywhere, USA Super Awesome Green Homes, Inc Mr. Home Energy Rater 6 Months After CO 2000 square foot wine cellar
Scoring Tools 61
MLS and Real Estate Professionals VALUE More and more MLS organizations are adding green and energy efficiency fields; these can be helpful to buyers, agents, appraisers and lenders Builders, with help from the HERS rater, need to provide documentation of features to listing agents so they can fill in the appropriate green fields Seller s agents need to populate the MLS if an existing home has home energy upgrades or has gone through a major retrofit or home performance remodel
MLS and Real Estate Professionals VALUE Buyer s agents, and builder s sales agents, need to be aware of green features, able to identify them in the MLS and educating their buyers so they understand their options Buyer s agents (and the builder s preferred finance team where applicable) should request a competent appraiser, one that has taken courses and/or has experience in valuing these type of homes
Multiple Listing Service Example VALUE
3 4 2 1 5
Objectives of the Addendum 1. Standardize the reporting process 2. Organize the description and expand the description 3. Provide a basis for comparable sale selection 72
Section One: Green Features 73
Section Two: Energy Efficient Items 74
Section Two: Energy Efficient Items (Continued) 75
Section Three: Solar Panels 76
Section Four: Location 77
Section 5: Incentives 78
Incentive Resources www.dsireusa.org 79
Important Questions How do we get the attention of consumers and minimize confusion? Where is the data?: How do we share data effectively and efficiently? Do we have proof that the products and certifications in the MLS are legitimate? Are building really selling for more? How much do consumers really save in the long-run? Who is going to pay for the additional work? Filling out the green/efficiency addendum Completing a more complex appraisal Extra documentation for energy efficient loan products
Resources for Appraisers Appraisal Institute Green Resources Commercial Green and Energy Efficient Addendum Residential Green and Energy Efficient Addendum Educational Info Webinars Publications
Resources for Appraisers What's green worth? Institute for Market Transformation (IMT) - Green Building and Property Value DOE - Home Energy Information Accelerator
Resources for Appraisers ENERGY STAR BuiltGreen Washington Information LEED Buildings Site Home Energy Rating System (HERS ) Index
Questions
Thank You! Please contact me if you have any feedback or questions: Shaun Hassel shassel@advancedenergy.org 503-477-0469