How does the use of green building products effect the appraisal value of a home?
Sunday, January 31st, 2010 at
8:46 am
I recently built a house and was told by an appraiser that the value of the house doesn’t reflect the products used to build. I don’t understand this since I’ve laways heard that Granite countertops increases the value of a home. So which is it?
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It does, if they are certified energy star. You need to do the whole thing energy efficient though, not just some things.
Granite counter are an accessory, they do not effect value, however they do make the house more desirable and easier to sell.
Certain components do add to the value of a home. These can include such items as granite countertops, stainless steel appliances and hardwood floors. All these are very saleable items right now and increase the home’s marketability. They can also be associated with more upscale housing compared to Formica counters, white appliances and carpet or vinyl on the floors.
Green building products are a different story. To date there is no evidence that "building green" has any impact on value unless it increases the home’s energy efficiency. Then it may raise the appeal of the house, but only within its price range. In other words, it won’t make that $125,000 house sell for $250,000, but it may sell in 30 days instead of 120 days.
The appraiser isn’t talking about the materials you’ve used. He or she is commenting that the cost to build a home NOW exceeds the market value of those homes. It’s the principle of contribution.
This is a tricky question that might be hard to get a simple answer, since so many aspects about appraisal do not universally apply to every property. It has been my experience that just about every home is some shade of green; cheap homes tend to be light green if they have some features, and other homes are dark green. And that’s just about all you read in the advertising these days…"green this" and "green that". Because being "green" means so many things, I pretty much ignore it. I don’t automatically give an extra 10% or $10,000 if somebody tells me their house is green; there’s just no way to quantify that. What is very important in the appraisal is not necessary what green things were used, but what the cost of construction is; this will be a starting point for determining the value. The next step is to determine if the green products were too expensive for the market area (this is called over-built). In Texas, you can spend $25,000 on a geo-thermal HVAC; however, a traditional system only costs $10,000. Most Texans are going to get a traditional system. And yes, granite counters usually increase the value of a property that previously had none; how much exactly is the answer to another Yahoo! question.