Citing a need for data that could help appraisers value homes with green and energy-efficient features, an appraisal trade group is teaming up with the state of Colorado to assess the impact of energy efficiency and other "green" features on the value of existing homes.
The Appraisal Institute says a memorandum of understanding to work with the Colorado Energy Office to collect information and identify trends will also help consumers decide which improvements to pursue as they seek to maximize the value of their homes.
"Although energy improvements can have a significant impact on the total cost of owning real estate, a lack of recognition of potential value can prevent buyers and sellers from making cost-effective upgrades," the MOU said.
Colorado Gov. John Hickenlooper and Appraisal Institute CEO Frederick H. Grubbe signed the document. Based in Chicago, the Appraisal Institute is a nonprofit association with nearly 23,000 members in nearly 60 countries.
The two parties will develop a curriculum for appraisers to learn how to value sustainable buildings; develop universal appraisal forms to report energy performance analyses on one- to four-unit homes; periodically assess the impact of energy efficiency on real estate values and return on investment across various property types; and educate homeowners about which improvements to pursue as they seek to maximize the value of their homes.
"Without relevant information and data, the stakeholders in real estate transactions are less able to consider energy use as a criterion to distinguish between properties in purchasing and selling decisions, diminishing recognition of possible benefits of energy-saving improvements," the MOU said.
In 2010, the National Association of Realtors released the Green MLS Tool Kit, a website designed to help multiple listing services identify and market features in their listings that lessen the environmental impacts of the homes.
The site, developed with input from the Appraisal Institute, encourages MLSs to go green by adding searchable fields and/or a checklist of ecological features to listings input forms. Such features could include native vegetation for landscaping, recycled building materials, a solar water heating system, and graywater plumbing, among many others.
The kit includes data entry form recommendations, information about green building certifications, and case studies of at least 34 MLSs nationwide that have already implemented the change.
Lisle-Ill.-based Midwest Real Estate Data LLC (MRED) first added search fields for green features and certifications to its database in 2010 and expanded the number of green fields offered in March of this year.
The MLS also added verification capabilities that allow agents to upload up to 14 green disclosure documents in the hopes of fighting the practice of "greenwashing" — exaggerated or unsubstantiated claims about a home’s green features — and also to make it easier for appraisers to access green and utility-savings information that can be important factors in valuing and therefore securing financing for a property.
In April, Northern Colorado MLS IRES redesigned its public-facing property search site, ColoProperty.com, to allow users to search by green features, including whether the home meets the requirements for Energy Star, Leadership in Energy and Environmental Design (LEED), or Home Energy Rating System (HERS) ratings or certifications, and whether a home has a high-efficiency furnace or solar heating system, among other features.