Not long ago, the main question in the forefront of a homebuyer's mind was, "How much house can I afford?" Today, the question is often, "How many energy-efficient home improvements can my pocketbook handle?" The need for green lending products and proper appraisals is the driving force behind a new market niche that caters to those who want to make their homes more energy-efficient.
Green home appraisals are hard to find
Many who improve their homes with energy-efficient products do so with high hopes of return, only to find that their appraisals are disappointingly low. The reason is inadequate appraiser training. Matt Grocoff, host of GreenovationTV and the owner of Michigan's first net-zero energy home, has his own story about green appraisals gone bad.
"When we went to refinance after we had done much of the energy-efficient retrofit work, the appraiser came in with an old checklist. He checked that we had an air conditioner and heater, but the geo-thermal unit was what he was actually looking at," Grocoff says. "Our house was appraised for well under the actual value of what it should have been, because the appraiser didn't have the facts, nor the training. He didn't even know what a geothermal unit was!"
This discouraging situation is happening more often as homeowners across the nation embrace green products for their homes. However, the problem is now being tackled with the development of standard guidelines for green appraisals. The Earth Advantage Institute offers a Certified Residential Green Appraiser course, and reaches out to brokers as well with the Sustainability Training for Accredited Real Estate Professionals (STAR) program.
Banks with green lending programs are ahead of the curve
Many lenders are now offering green home loan products for homeowners, and for good reason: the return on investment is a nice incentive. "For every dollar of energy savings that the home can gain, it would increase the value of the house by $20," Grocoff says. "Therefore, if you were to save $1,000 per year, that would increase the value of your home by $20,000. Savings on energy costs will only go up in value."
Programs that have been in place for some time, such as the Energy Star Mortgage, Energy Efficient FHA Loans, the FHA Rehab Loan, and the FHA Title One Rehab Loan are good options for more homeowners. Solar lease programs are also becoming popular for energy savings, but might not offer a tax credit.
Local lending opportunities can provide an even wider array of options. A good example is Energy Upgrade California, a program that includes substantial rebates--up to $3,500--for a whole-house retrofit.
"Private loans are getting more creative," Grocoff points out. "Energy companies are partnering with banks to offer loans for green items like solar panels and geothermal units. The loans are helpful in 'closing the gap' between actually paying for the items and waiting for the tax credit, which doesn't kick in until the following year."
New green programs for homeowners are on the horizon
As more homeowners turn to energy-efficient home improvements, there becomes much more to consider than merely mortgage rates when deciding on ways to trim household costs. New green financing programs are popping up all over the country and working to catch up with the latest innovations.
State programs bolstered by the American Recovery and Reinvestment Act are available but vary from one state to another. One group drawing national attention is Michigan Saves, a program very active in green lending for home improvements, as well as pilot programs that are promising for homeowners and businesses alike. There are also the more traditional routes; individual lenders such as GE Money offer loans that can make green remodeling more affordable.
How can you find these innovative green loan products and trained, eco-friendly appraisers?
To find the best financing for your green projects, start with brokers, lenders and appraisers who are familiar with energy-efficient products. Work with a real estate agent who has experience with green homes; they might be able to refer you to a lender who offers green loan products. Look for a lender who advertises their familiarity with green properties and offers home remodeling options that focus on energy-efficient improvements. Turn to organizations like the Appraisal Institute to find qualified appraisers that can tell you what your home is really worth.
Keep in mind that many lenders, brokers and appraisers want to help you with your energy-efficient improvements, but simply may not have the tools or information available to understand the implications and advantages of green lending or remodeling. Don't be surprised if you find yourself in the role of educator. To learn more about the many green options available to homeowners, be sure to visit www.HSH.com.
Shannon Dauphin is a journalist and occasional novelist with a serious weakness for real estate. Her current home was built in 1901, so home repair and renovation have become her necessary hobbies.