Regular readers know where I come down on environmental issues, which is usually on the environmentalists themselves. This is largely because I see the movement as a form of communism, which is a) a political system, and I detest politics, and b) just plain wrong (personal mantra No. 1: “The earth belongs to those who own the land ... please make a note of it.”).
So concepts like sustainability, environmentally responsible, and even the word “green” itself tend to enrage me. But, as regular readers also know, I get real excited about energy efficiency—because it saves money.
There is no doubt of this. And there are ways to calculate that savings. The Home Energy Rating System (HERS) from the Department of Energy is the primary tool for doing so. But right now, nobody in the lending world accepts this.
There used to be such things as “green mortgages” at Fannie Mae that would allow a borrower more leeway on monthly payment limits versus income in proportion to the savings energy-efficient technology would yield on utility bills. Of course, those mortgages became moot when Fannie started lending to lampposts and liar loans were born.
Now, there are some folks who would like to bring them back. Among them is Michelle Desiderio, director of Green Building Programs for the NAHB Research Center. She knows the subject well—she used to run Fannie's green mortgage program. The HERS score (since revamped and changed to an index) allowed an actual calculation to be done that showed net energy savings, in dollars, by region and by utility. The capability to calculate this, at the touch of a button, is incorporated into existing RESNET (Residential Energy Services Network)-sanctioned energy-rating software programs such as REM/Rate and EnergyGauge. “At the time,” she recalls, “that number was allowed to be added to the appraised value of the house.”
That is exactly what builders would like to see. Anecdotal evidence reported by many builders indicates that home buyers like energy efficiency and green amenities, but they do not want to pay extra for it. The builder, in turn, doesn't spec it in, because it won't add to the value of the house and can't be rolled into the mortgage.
The foremost problem, it appears, is that there is no database of home values on which to base the value of various energy-efficient amenities. Al Medina, director of the Green Designation program for the National Association of Realtors, is pushing to change that by cajoling local and regional multiple listing services to include green data.
There is another problem. Not all appraisers know what they are doing in this area. Dave Porter, president of PorterWorks, a green training and consulting firm based in Stanwood, Wash., is on the case. His company offers a two-day training course designed to educate mortgage lenders, appraisers, and property insurance agents about the growing green real estate industry and their role in it. “There really are some things these appraisers can do to value these homes properly,” he says.
The logjam in lending needs to get cleared out, Porter believes, before much progress can be made. “Lenders are simply not offering the energy-efficient mortgages. Builders can and should call out the complacency card on appraisal.”