As the industry leader in green and energy-efficient valuation, the Appraisal Institute in September issued an optional addendum to Fannie Mae Form 1004, the appraisal industry’s most widely used form for mortgage lending purposes.
Currently, the contributory value of a home’s green features is rarely part of the equation. The Appraisal Institute’s new form will help the industry standardize the way residential energy-efficient features are analyzed and reported.
When AI created the Residential Green and Energy Efficient Addendum, we sought to make it easy for appraisers to determine an opinion of value related to a home’s energy-efficient features. Used by Fannie Mae, Freddie Mac and the Federal Housing Administration, Form 1004 is completed by appraisers to uphold safe and sound lending and makes it easier for appraisers to determine whether recent home sales should be used as comps. Sales that are truly comparable are key components in determining a property’s value.
Our hope is that lenders, home builders, real estate agents and homeowners will take advantage of this new tool. It is the first of its kind intended for appraisers’ use.
The Appraisal Institute’s addendum allows appraisers to identify and describe a home’s green features, from solar panels to energy-saving appliances. Form 1004 devotes limited attention to energy-efficient features, so green data usually doesn’t appear in the appraisal report, or it is included in a lengthy narrative that often is ignored.
Mortgage lenders who want to see energy features analyzed should request the green addendum to be included with Form 1004. We also encourage lenders to provide the green addendum to homeowners so they can fill it out and provide it to their appraiser. If a new home is being appraised, home builders can use the addendum to provide data to appraisers. Real estate agents also can use the data to help populate the MLS.
According to a recent Appraisal Institute webinar led by Sandra K. Adomatis, SRA, Energy Star certified more than 1.1 million units as energy-efficient from 1995-2010. Energy Star is a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy. The Appraisal Institute webinar noted that in 2011, more than 56,000 LEED green homes were registered. LEED stands for Leadership in Energy and Environmental Design and is an internationally-recognized green building certification system developed by the U.S. Green Building Council.
To see the Appraisal Institute’s wide variety of green courses, click here.
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