Not All ‘Green’ Created Equal

The popularity of green building continues to rise, as more property owners opt for green features. However, green features can often be difficult to classify, and can be even harder to value.

The benefits for consumers are vast, and can include money and energy savings, increased comfort and personal health, and enhanced performance and less maintenance. Often times, government and manufacturer incentives can further sweeten the deal.

Yet, as the demand for green home features escalated, some in the building and real estate industries attempted to painting a houseinappropriately capitalize on the popularity, which resulted in green wash. Green wash occurs when professionals refer to a home or product as green, when in reality, only one or a handful of characteristics would be truly considered green.

Sandy Adomatis, SRA, recently spoke to the Sarasota Herald-Tribune about what does – or often times does not – qualify a home as being green. In order to receive a “green label,” she explains, a home must have a combination of six green elements. These include site, energy efficiency, indoor air quality, water efficiency, materials, operations and maintenance.

For appraisers, it is imperative to understand the differences between standard code-built homes and high-performance homes. Understanding these differences will assist the appraiser in understanding the cost approach or recognizing potential differences in the adjustment process of the sales comparison approach.

Because green data doesn’t typically appear in an appraisal report, an appraiser must give particular consideration to green features and upgrades and make a concentrated effort to correctly value the features and include them in a report. The Appraisal Institute’s Residential Green and Energy Efficient Addendum can help appraisers with this task. Appraisers should also take into account whether recent sales can be used as comps, and what assistance they can provide Realtors for populating the MLS with green data.

Do you have experience valuing green properties? What challenges or issues have you encountered?