Archive for the 'Finance' Category

Green home appraisal blues

When we started this project, we knew we were going against the prevailing wisdom, it’s one of the reasons we call this the uphill house. We always seem to be pushing things uphill when they naturally want to go the path of least resistance. First we decided to build a house on the side of hill. Not the easiest or cheapest option, but the view is spectacular and we have great access to the sun. Then we decided to build a super tight, super insulated house in an area that has no skills building this way, but we did it anyway and were quite successful. Finally, we decided to build a smaller house so we could spend our money on quality materials, systems and appliances.

All these things make a beautiful, long lasting, extremely comfortable and efficient home, but unfortunately don’t appraise well. We recently had our home and property appraised as we seek to roll over our construction loan into a mortgage.

Make sure there’s something soft under your jaw… the appraisal came in at roughly 65% of the total value we’ve put into the land, house, driveway, septic and well… and that doesn’t even include our own sweat equity.

The main issue is the lack of comparable properties. The closest truly comparable net zero homes in New York are closer to Albany, and there’s a few across the border in Vermont and Massachusetts. Since there are no comparable properties in our immediate area, we must be compared to houses of a similar size and number of bed and bathrooms. Those houses are far cheaper since they only include the code minimum for insulation and none have a solar PV array. The difference in value is quite large.  (There is a good article by Richard Defendorf on the GreenBuildingAdvisor site that describes these issues, When Green Poses an Appraisal Problem.)

As we see it, home appraisals are good at valuing similar things, apples to apples, but fail when comparing Apples to PCs. We are quite happy to pay a premium for Apple products because we understand and appreciate the value. If you don’t understand the value, then an iPad clearly looks more expensive than it’s worth when compared to other tablets. If you’re only means of comparison is square footage and number of beds and baths, then our house looks more expensive than it’s worth in comparison to other homes.

The end result is that we do not qualify for a standard loan from Freddie Mac. Thankfully we are working with a great local bank that sees the value and is willing to take the loan onto their balance sheet. However, to protect themselves from the extra risk of not being able to resell the loan to Freddie Mac, they are offering the loan at a higher interest rate.

And this is what leaves us feeling blue. Building green and choosing quality over quantity is considered more risky than a standard home built using standard practices.


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