Green real estate projects are mushrooming, but not as fast as developers would like them to. While environmentally friendly technologies are rapidly rising, there is one aspect which still has not fully kept pace with the emergence of green housing on the housing market the issue of appraisals. Take a house that would usually cost half a million dollars to construct. In addition, you choose to invest into high-quality insulation, solar panels, and ask your architect to design the house to make use of sunshine to its fullest potential. This will cost you some hefty money, so let's say the full costing goes up to $600,000.
Still, your bank's appraiser sees it another way. It doesn't do a lot of good to solely add value based on price, but the question is, How much will the market pay on resale?' says David Snook, an appraiser and member of the real property committee on education for the American Society of Appraisers.
Let us continue with our hypothetical example. Whilst the build cost an extra $100,000 the bank or mortgage company will only recognize the price of the property has increased by $50,000 With a 20% down payment, you will have to have $160,000 in place of of $110,000. Instead of having $27,500 to pay you would have $77,500, if you were trying for a high-ratio mortgage, as these demand a 5% down payment. That is a large contrast especially if you are on a budget and every cent matters. So with such a massive down payment you have to assess your priorities and these could be forgetting about going green, or making do with cheaper and conceivably inferior technology.
However, as a green MLS professional I understand green homes do make a difference whatever the price increase. If you look at the Green Work Realty statement, you will see why green houses are better financially, with their increased resale value of more than 8% and the fact they sell 22% faster. Although green real estate technology is getting better, if you are unlucky enough to get your home valued by an appraiser who has limited knowledge in this field, then your home will be undervalued.
While you can show the appraiser the pricing, until they have the knowledge then there is not a lot you can do about it. Although there is no standardization for environmental and energy performance at this time, I believe that they will soon be on their way. Green housing is not only about the environment, it's also about cost. When looking at buying a vehicle, one of the first things you find out is its fuel consumption, how many miles to the gallon does it do. Therefore it is only common progression when using the same analogy when buying a house.