Developers would like to see green real estate projects rise quickly. Sadly appraisals are slowing down the quick advancement of the environmentally friendly real estate projects. Take a home that would usually cost half a million dollars to build. You decide that you want the property to be more environmentally friendly, therefore you ask your architect to design the new house so it utilizes the sunshine and you put in high quality insulations and solar panels. Now going green doesn’t come cheap therefore these green choices are going to increase the build charges to $600,000.
Still, your bank’s appraiser values it differently. David Snook says “It doesn’t do a lot of good to simply add value based on cost, but the question is, How much will the market pay on resale?’ , he should be able to tell us, as David is an appraiser and associate of the real property committee on education for the American Society of Appraisers.
Let’s carry on our illustration. Your bank or mortgage company will only recognize a $550,000 price. This increases your deposit by $50,000 working on a 20% down payment. With a high-ratio mortgage 5% down payment, you will have to save $77,500 in place of $27,500. That is a very large amount of cash to get hold of straightaway. This might force you to search for the cheapest green option, using older and cheaper technologies, or maybe you will write off the whole green idea of the project altogether.
However, as a green Toronto MLS listings agent I realize green properties do make a big difference whatever the price increase. If you look at the Green Work Realty report, you will see why green real estate are better financially, with their increased resale value of more than 8% and the fact they sell 22% faster. This information doesn’t help us though if you are dealing with bank or mortgage business appraisers who don’t have much if any experience with the green property technology.
While you can demonstrate to the appraiser the figures, until they have the knowledge then there is not a lot you can do about it. Anyway, I believe there will be strong initiatives soon to standardize indicators of environmental and energetic efficiency, which will certainly help appraisers (and future owners) to move forward. Even though green housing is about the environment and efficiency it is also about price. When looking at purchasing a motor car, one of the first things you find out is its fuel consumption, how many miles to the gallon does it do. So when purchasing your new property, it stands to reason the logical thing to do is find out how energy efficient the property is.
