Is Green Really Worth the Green?

I caught a news piece this morning while at the gym.  The title was something like the one above.  The segment dealt with the question, Do energy efficient upgrades in a home make a difference in the sale price? Even with long-term energy savings, the short and resounding answer was, “NO.”  While it makes all the difference for the environment, the sale prices do not reflect the upgrades, whether it be solar, added insulation, dual flush toilets, Energy Star appliances, etc.  The target then got pinned on appraisers.  They bluntly said that it was the appraisers fault… [paraphrased] The appraisers are behind the curve on this one.  It’s the appraisers that have not gotten up to speed and are not giving correct value to these items.  When an appraiser sees a furnace, whether it’s energy efficient or not, they just see a furnace…”

Now I have friends that are appraisers that will read this and have an acid reflex response (a little sour taste in their mouth).  And I know theses appraisers do know the difference and can spot energy efficient systems.

I would love a response/rebuttal from the appraisal world.  Sound off.

And don’t kill/hate the messenger – I’m just reiterating what I saw on the news this morning.

Enjoy,

Keith Klassen – Real Estate Broker

916.669.9030

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5 responses to “Is Green Really Worth the Green?

  1. How funny that you mentioned “appraisers are the killers” here because I saw part of your article in the email your new post, and I was going to mention this.

    Builders recently pinned this on appraisers too in another article I read. I’d be curious to hear from the general public on this one though because if energy efficient upgrades cost $30,000, would you pay that much more for the upgrades? What if you do not save $30,000 too in efficency? That’s not much incentive to pay $30,000 more.

    Just because a builder is putting in a feature, whether energy efficient or not, does not mean it is worth anything to the typical buyer. There is a huge difference between cost and value, isn’t there? The builder’s just might be trying to break ground on a new market, but this market may still be a niche and not acceptable to everyone yet?

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    • I can smell the bile on your breath. Well said Ryan – I knew I could count on you for a good, strong, thoughtful rebuttal. I’ve got nothing but love for you (except when you slash the value on my appraisals – just kidding)

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  2. That was actually bacon on my breath, Keith.

    There is always a finger to point, and appraisers may not be the correct target in this instance. However, the truth too is that every facet of the real estate field will be adapting to this sort of thing because it is new. When something is new, we just don’t see it as clearly as we will 10-15 years down the road. There is definitely room to grow in the appraisal field in this regard, but my main question really is if the typical buyer is really willing to pay full cost here for something that might not pay them back for the cost involved.

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    • What happens when a buyer is willing to pay for it (whether it be the house itself or energy features), yet the value does not come in at the offering price? At what point does the market (people) dictate the market value?

      On a different note, a friend of mine and I had a conversation a while back on the virtues of buying a hybrid car. My take back then (3-5 years ago) was, they just are not worth the money. He simply replied, “It’s really not about the dollarization or the time that it takes to get your money back on the investment. You just have to buy into the altruism of it – that it’s benefits are not just for you or what you can get from it, rather the benefit to the environment, to the world, and to our children. I guess this will always be an uphill battle in our individualistic, ego-centric, and consumerist culture.

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  3. The appraiser analyzes what the “typical” buyer would purchase the property for. That’s what market value is all about. There might be a “specific” buyer who would purchase the property at a higher or much higher price, but that’s just one person willing to exchange more money than most would shell out. What most people are willing to pay for a property is a big part of market value. This is why I always like to hear from agents (when possible) about the offers on the property and even the range. It’s interest to note the range and then interpret that too. Is there a difference in offers when it comes to cash, conventional and FHA offers? What if all FHA offers are at the very top of the offers? What is that telling you?

    I heard a “green” speaker talk about hybrids recently, and I was glad to hear him say, “don’t go buy one unless your car is about to die.” He thought it was wasteful.

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