Lack of Data Complicates Valuation of Green Homes

CHICAGO (March 31, 2015) – Valuation professionals, real estate agents and homebuyers face challenges in the process of valuing, selling and purchasing green and energy-efficient homes due to a lack of comparable properties and a lack of data, according to an article published this week in The Appraisal Journal.

The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest professional association of real estate appraisers. The materials presented in the publication represent the opinions and views of the authors and not necessarily those of the Appraisal Institute.Green Appraisals for Green Homes

“The Challenges of Valuing Green,” by Sandra K. Adomatis, SRA, LEED Green Associate, discusses the lack of consistency in sales data on high-performance homes, citing an inadequate system of keeping and sharing the necessary data to determine their value. When applied to homes, green takes on a variety of meanings, and this creates difficulty in the marketplace, leading many valuation professionals to compare “apples and oranges” when valuing a home that has been classified as green.

The author reminds valuation professionals to consider the costs of building a structure rated the “darkest” shade of green as compared to a structure with a “lighter” shade rating. Marshall & Swift/Boeckh’s 2013 Residential Cost Handbook reports that the additional cost to build green instead of code ranges from 3 percent to 20 percent. This range is wide because the shade of green is a determining factor. If a structure costs more to build, the seller usually expects to sell it at a higher price.

The author advocates educating market participants and real estate agents on the value of green features, as well as instituting uniform standards for tracking and storing data on green homes to solve the challenges facing those who sell, buy and provide opinions of value for high-performance homes.

Adomatis is a practicing real property appraiser and consultant at Adomatis Appraisal Service in PuntaGorda, Florida, where she is involved in a variety of residential and small commercial property appraisals. She is a state-certified general appraiser and has been an active Designated member of the Appraisal Institute since 1985. She earned her LEED Green Associate credential from the Green Building Certification Institute in 2013. She has edited and contributed to Appraisal Institute books, courses and seminars, and has published three previous articles in The Appraisal Journal about high-performance properties. Adomatisreceived the Appraisal Institute’s President’s Award in 2013, and in 2012 she received the Dr. William N.Kinnard, Jr. Award from the Appraisal Institute Education Trust.

Source: The Appraisal Institute

Read “The Challenges of Valuing Green” in the Winter issue of The Appraisal Journal.

Also in The Appraisal Journal’s Winter 2015 issue:

“An Empirical Assessment of the Value of Green in Residential Real Estate,” by Anjelita Cadena, Ph.D., and Thomas A. Thomson, Ph.D., evaluates the extent to which green components add value to a house’s selling price, finding that green and energy-efficient homes demonstrate a statistically significant increase in selling price.

“Animal Operations and Residential Property Values,” by John A. Kilpatrick, Ph.D., MAI, summarizes the current literature on how animal feeding and processing operations may affect the value of residential properties located near such facilities.

1 Comment

  1. It is not only a lack of data but a lack of knowledge, failing to understand has led to a failing to appreciate, properly account for, and adjust for components that responsible builders have used for DECADES and all buyers desire. Appraisers and their licensing bodies need to push for a mandating of remedial schooling in this field as I can attest that their initial education in it is sorely lacking.

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